If you’re contemplating a new self-storage project, it’s imperative that you perform a feasibility study, particularly in these times. Many markets are overbuilt or at the saturation point. You don’t want to build a project that becomes the tipping point to rent concessions and occupancy slides in the marketplace. A well-done feasibility study by a third-party, unbiased provider will tell you if your project has the attributes it needs to succeed or, more important, if it fails to meet the criteria for success.
Study by Whom?
First and foremost, consider who is actually going to prepare and complete the study. Ask a lot of questions before you award the assignment. Is the person unbiased in his opinions? Be wary of those who have something to sell should the study conclude with “build.”
Does the provider have experience in developing self-storage projects, either for a large company or his own portfolio? Is this experience recent? Things are much different today than 20 years ago in almost all aspects of development and construction.
Does the provider have experience in what it takes to lease up properties to 85 percent occupancy? Everything looks easy on paper, but leaseup is the toughest thing to accomplish.
When did the provider last research development and construction costs? A well-prepared study should include a construction budget that’s very close to actual costs. It should also reflect the latest market rates and terms for financing. Remember, a great feasibility study is the road map to a successful project.
What the Report Should Include
Let’s look at what comprises a quality feasibility study.
Executive summary. The report should include an executive summary that clearly states if the project should or should not be built and the reasons why. You’re paying good money for a clear answer―demand it. Your bankers and partners may not read the whole document, but they will read the executive summary to get that answer.
Site examination. The study should evaluate the site being considered and provide recommendations on general layout. Most feasibility-study providers are not professional engineers, so don’t expect CAD drawings. You want a general site design you can provide to your engineer to save time and money and, most important, create the best design possible.
This general design determines the approximate square footage a site may produce, which is critical to the study. The design will also dictate construction costs, which will vary widely between a traditional single-story, drive-up facility on a flat lot and a four-story structure built into a hillside, for example. To maximize a site’s square footage, consideration should be given to visibility, office location, security, ingress and egress, where to push snow in northern climates, storm-water management, and building location.