By Jim Ponti

One of the most beneficial routes to self-storage ownership is through building conversion, the act of taking a pre-existing building from another use and turning it into a new storage facility. Any site—a grocery store, strip mall, office building, etc.—has the potential to become a successful hot spot for conversion. There are pros and cons in this process, but the central benefit is how it can positively impact your net operating income (NOI).

Building conversion can remove common obstacles to investing in self-storage and may make the cost of development more manageable. By choosing a building that harbored an existing business, you have the advantage of using all the plumbing, electrical wiring, restrooms and offices that are already included in the purchase price. When evaluating potential sites, however, there are many important factors to consider.

Let's take a look at the benefits and challenges of developing a self-storage conversion project. We'll look at structure, location, costs, legalities, functionality, design and more.

Structure and Location

It’s important to keep in mind the obstacles you may face when creating a self-storage facility from a building that wasn't designed for that use. What you gain in functionality you may lose in non-compatible structure.

For instance, many older buildings contain asbestos. This creates an environmental issue for your business that can only be resolved by replacing every source of the contaminant, from tile, glue and insulation to any other items and places in which it could reside. This costs time and money, and many banks are reluctant to include environmentally challenged properties in their portfolios.

Shopping centers have demographics that can work well for a storage facility. In addition, these buildings have enough roof height to make it possible to install two floors, as well as excess parking areas that allow for expansion. The challenge lies in trying to convert a large shopping center, such as a strip mall, which may have an overwhelming amount of space to fill. This can result in wasted resources when the space isn't used to its full potential.

Office conversions face other hurdles. While you can find a wide variety of space, offices are set up in a manner that isn’t ideal for self-storage. They often have a unique heating and cooling system, lower roofs, and hallways and elevators that are designed for the transportation of people, not bulk items.

Hotels can be all chopped up in design. Warehouses can be stuck in industrial areas, crippling a storage business due to lack of traffic. No matter which building type you choose for a conversion, problems will likely arise. Being aware of the challenges each option presents is an important part of finding a location that’s ideal for self-storage.

Site Evaluation

The first step in a conversion project is to evaluate the building. It’s vital to check the potential structure thoroughly to determine if the project is possible. Here are some things to consider:

Costs and Legality

The second step is to calculate the costs to convert your chosen building to self-storage. The cost and legality surrounding the project should always be at the back of your mind. For example, there may be restrictions around items such as dummy doors and display areas, outparcels, portable storage units, building layout, clear height, slab engineering and soil type.

One particular issue many new facilities run into is the Americans with Disabilities Act (ADA). By failing to implement building designs and adhere to codes that comply with ADA, some operators have fallen victim to lawsuits and heavy settlements. The best way to avoid such legal action is to administer the required building code during the initial development. All these details help to determine whether a facility can be successful in its market.

Functionality

Next, it’s important to check the building’s overall functionality to ensure it will satisfy tenant needs while allowing you to maintain firm management control. This is vital to keeping your facility organized and running smoothly without compromising its integrity.

For example, make sure there are no public restrooms in the office area. This will allow the facility managers to lock up whenever they need to without having to worry whether there’s anyone with access to the office.

You also want to regulate access to all floors and elevators, giving managers the power to dictate where residents are at all times. Lighting, layout, exits, hallways, humidity controls—all these facets should be managed in a way that keeps customers satisfied within a controlled environment.

Design

The last consideration for your conversion project is the design. You’ll have to make choices about building and door design, the use of mezzanines and islands, the placement of elevators and stairs, etc. All of these must be weighed from the perspective of cost vs. utility. The most important goal is to ensure you’re using the structure and its existing features to their full potential.

The success of a conversion relies on your understanding of NOI as well as your ability to achieve these objectives through the process:

Know your market. Know your facility. Use every asset available to you. Invest in those who have experience, not just in building development but in altering a structure to fit the needs of a new industry. Plan ahead, and don’t invest in a property unless you can use it to its full potential. If you manage all this, your conversion will succeed.

Since 2002, Jim Ponti has been a regional sales manager for Janus International Group LLC, a manufacturer of self-storage roll-up doors and building components. He provides design, feasibility, operational and product-application assistance to facility owners and developers. He’s also part owner in several Gulf Coast self-storage facilities. For more information, call 504.254.1048; e-mail [email protected]; visit www.janusintl.com.