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Choosing a Site for New Self-Storage Construction: Factors to Consider

By Jim Chiswell Comments

Author Charles Dickens opened his epic novel “A Tale of Two Cities” with a line that seems applicable to where we find ourselves today in the self-storage industry: “It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness…”

It’s the best of times due to the fact that interest rates are as low as they’ll be in our lifetimes, and self-storage has become a mainstream investment vehicle. You no longer have to explain to your banker or possible investors what the industry is all about. On the other hand, it’s the worst of times because of all the money chasing our business, the lack of quality properties available for sale, and the increased competition for potential development sites. Land prices are at record levels in many communities, and the lack of properly zoned parcels makes it difficult or, in some cases, impossible to find a parcel on which to build.

In this “age of wisdom,” some storage builders and owners are diligently doing their homework, turning over all the rocks in their target market to find their best prospect. However, the “age of foolishness” has brought out countless others who’ve started to believe that “if you build it, they will come.” “I already own the land” is often repeated as justification for building in a specific location.

Finding a solid self-storage site has gotten more challenging as our industry has become increasingly competitive. There are no perfect sites left in the United States. Every location now involves some trade-offs and risk. The key is to consciously balance those drawbacks from the very beginning.

If you’re planning to build a new self-storage facility, this article covers some factors to consider when searching for a plot of land. Many are items that few people think about at the start of their quest but can have a huge impact on the outcome of a project. I’ll also discuss the characteristics of a good site for new construction.

Things to Consider

Site selection involves balancing the target market’s demographic profile with the characteristics of the parcel. You’ll need to research several different aspects of the area.

First, you need to look at the rental rates of established facilities in the market. You might find a storage facility on one side of town earning an annualized equivalent rent of $8.25 per square foot, while the rate at a facility just 20 miles away is $10.75 per square foot. On which side of town would you rather build? Yes, the land will probably be more expensive on the upscale side, but the difference in construction costs will be zero.

On the list of site-selection criteria, the performance and location of existing competitors is vital to examine, but there are other factors to consider and obstacles you may encounter. Keep in mind a site’s gross square footage may not produce the buildable acreage you anticipate. Here are some possible reasons why:

  • A storm-water retention pond is necessary and can easily eat up half an acre.
  • The wetlands area with its beautiful cattails must be set aside, per city zoning regulations. Often, there will be a buffer area around the pond as well. Say good-bye to another acre.
  • The Army Corps of Engineer’s Flood Plain Map shows the far corner of the parcel is in the 50-year flood plain. You can’t build on that ever.
  • A Phase 1 and then Phase 2 Environmental Assessment reveals you have petroleum contamination from a prior use as a truck-parking lot. Will your lender even consider offering a loan after you spend the money to clean it up?
  • You could lose half an acre for the community’s landscaping or green-space requirement.
  • You can’t build under the overhead power lines that bisect the land. There may be an option, however, for outside vehicle parking if the zoning code allows it.
  • You could be facing new competition. Ask at the zoning or building department if there are any new facilities in the pipeline for your assumed market area.
  • You can’t forget about the mandatory front, back and side-yard setbacks. That 100 feet from the road, 25 feet in the rear and 35 feet on both sides take another chunk of buildable acreage.
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