What are the land and market requirements to develop self-storage condos?
There are three types of locations to consider: a neighborhood location, an “on the way” location, and a destination site. Neighborhood locations are the most ideal, as those who own RVs, cars and boats like to tinker. However, land costs often prohibit this type of storage.
On-the-way locations are facilities found on the way to a popular destination. These sell really well when potential buyers consider that driving the first 30 miles by car is less expensive than driving the RV. Since they own their unit, many simply store clothes in the RV, the refrigerator is running and ready, and the batteries are all charged up.
Depending on the surrounding demographics the destination itself, a destination site works really well. A good example is the Colorado River area, used primarily by commuters from Southern California who make the four- to six-hour drive several times a month from spring to fall. Why drag a boat all that distance when it makes perfect sense to leave it at the goal locale?
In terms of land requirements, there’s really nothing out of the ordinary for this style of construction. Flat is good, as is rectangular. Industrial zoning is good as it generally allows storage, saving the developer the time required to apply for a conditional-use permit.
Spend time with the city or county planning office and closely examine its developer fees. The difference from city to city can be staggering. In our case, developer fees were more than $450,000. So, while the cost for land is one consideration, the cost of development carries almost as much weight.
Condo-storage facilities are often built like clubhouses where owners meet. What other amenities do owners desire?
Owners want to feel comfortable and secure in their new garage. Clubhouses, while they may seem excessive, serve to round out the complete amenity package. Further, they can help present a comfortable upscale offering, justifying the condo cost. Potential buyers expect quite a bit from a project like this. They want to make certain they’re going to receive good value for their hard-earned dollars.
After a year or so of sales, the one thing that’s commonly requested is some sort of valet service. When the owner returns from a trip, he can turn his RV over to someone who will wash it, detail it, empty the holding tanks, and put the RV away, ready for the next trip. This is a really good idea, and we’re working on a few potential solutions for that issue. Other than that, security is high on the list, with other niceties like dump stations, electrical service, laundry and possibly showers.
One other feature people might like, especially those traveling from afar, is a few outdoor camping spots so they can spend a few days relaxing and provisioning their RV for the trip ahead.
How has the lack of financing affected the development of self-storage condos?
It stopped everything. Without construction financing and banks being tight-fisted with loans, all condominium construction was halted. It was hard enough to get a construction loan when things were good (2005 to 2007). Now that lenders have much tighter lending and reserve requirements, new construction financing for storage condos simply doesn’t exist. The only other resource is private lenders. They do have their place, but the funds are much more expensive.
The financing of individual condominiums for new buyers is also non-existent. No lenders have been willing to lend on such a new concept. After potential buyers jumping through hoops, there have been no lenders willing to take on a project like this. We’ve been providing our own financing since June 2010, but 90 percent of our buyers have paid cash for their units.
Did condo purchases suffer during the recession? What’s the status of the purchasing market now?
Yes, they did. Our grand opening was in March 2009, when the financing world was circling the drain. We had just come off of $5 per gallon gas, the deepest recession in my lifetime was underway, and the world lenders were failing left and right. Talk about your perfect storm. Yes, it scared away 80 percent of my potential buyers in the following two months. This is a consumer discretionary purchase, like RVs, cars and boats. Everybody and everything stopped and held their breath for what was about to happen.
Fast forward 18 months, and we’re once again selling garages at a respectable rate. We’re averaging about one unit sale per week, and we’re about 45 percent sold out. During the deepest part of the recession, March 2009 through May 2010, we stopped marketing and sat back and watched what the economy was doing. Fortunately, it does seem we’re a nation that’s recovering. It’s not what it was, but it seems consumer confidence is back and people are feeling good enough to invest in some of their own personal pleasures.
Do you expect condos will continue to grow in popularity?
Without question, yes. Many of the people buying at our project don’t even have their RV yet. In fact, we closed one like this recently. The owner wanted to secure storage for his RV now, before he went out and invested in a $200,000 vehicle and was forced to put it out in a field somewhere. I can’t tell you how many of our visitors have retirement plans for the next one to three years. They may not be able to buy today, but there certainly will be a bubble of interest in the next two to five years.