By Caesar Wright
With increasing land costs and escalating city and county building requirements, self-storage developers are getting more creative at sites on which to build. This article outlines considerations for acquiring a parcel for self-storage.
The highly competitive self-storage market requires a level of sophistication when choosing a location and developing a project for maximum profit. As with all real estate ventures, the old adage, “location, location, location” still applies. To maximize profitability and reduce liability, it’s critical to understand the current storage saturation levels in your proposed area and the types of storage that are most in demand in your target market.
Understand the Market for Self-Storage In Your Area
When developing a self-storage facility, first consider the needs of the market. In rural areas, for instance, the market may need bigger storage units and drive-up access to store large farm equipment. If your facility will be near a college, the market will demand smaller, less expensive units.
Also consider the types of storage currently not offered in your market. Many self-storage developers have built facilities that cater to a specific niches, such as high-end cars, RVs, boats, wine, online product fulfillment, etc. These operators attract tenants from well outside their geographic areas due to the very specific offerings they build into their sites.
Determine Supply and Demand
There’s always the possibility that storage supply in certain areas may be surpassing the demand from customers. Higher monthly turnover, more short-term tenants, increased vacancy rates and move-in discounts are signals that there may be over building in a given area.
In an area where there’s a lot of construction of new housing and businesses, this market saturation could be temporary. Once the neighborhood matures, demand could eventually "catch up" to the supply. On the other hand, over building in an area plagued by vacant buildings and declining neighborhoods may be a permanent problem.