City Restrictions Against Self-Storage Development Create New Barriers to Entry
If you’ve been following our development and zoning coverage, you may have noticed a recent pattern of skittishness from some municipalities, even as self-storage projects continue to emerge at a feverish pace. Some cities have taken notice of the number of facilities either proposed or under development in their region and become leery of the buildout. In reaction, some have created new barriers for developers to clear.
From the Northeast to the South to the Midwest and even Canada, some municipalities have either considered action to curb self-storage development or passed measures to ban or restrict projects from specific zoning districts or areas of business. Self-storage projects have frequently trudged uphill battling negative stereotypes, but even with a proliferation of beautiful modern facilities to combat old notions, this current backlash should serve as a warning to new investors and developers to perform thorough due-diligence on any area under consideration.
Among the most high-profile cases is New York City where Mayor Bill de Blasio has proposed a self-storage ban from the city’s 20 industrial business zones (IBZs) as part of a 10-point Industrial Action Plan. Self-storage facilities could still be approved with a special permit, but new restrictions will only make the development path in IBZs more difficult. The city council is reportedly favorable toward the proposal, which also affects hotels.
In South Florida, where storage development has been particularly active for several months, officials in Miami and Collier County are also looking for ways to curb new projects. At issue in Miami is a measure passed in 2010 that removed a stipulation requiring 2,500 feet between self-storage facilities. Since its removal, the city has reportedly received 20 storage-project applications. Four of those have been built, and 10 are under construction. Officials are looking to change the zoning ordinance to curtail new projects.
Money quote: “Nothing takes away from the city more and adds so little as these buildings,” Adam Gersten, a member of the planning, zoning and appeals board, said during a November meeting.
Meanwhile, commissioners in Collier County have placed a year-long ban on self-storage and several other land uses along a 7-mile stretch of U.S. Highway 41, near the Naples, Fla., city limit. The development moratorium also includes car washes, gas stations and pawn shops, while the county works on a plan to lure hotels, restaurants and retail to the area. The latter is preferable for obvious money reasons, which is where the rub against storage development really lies.
Part of the pushback against the industry is a lack of permanent job creation and sales-tax revenue. Last summer, officials in Lincolnwood, Ill., enacted a one-year, temporary ban on self-storage development in the village’s commercial areas to preserve space for businesses that generate more tax revenue. In December, the village board voted unanimously to remove self-storage as an allowable use within areas zoned for manufacturing and office uses, preferring to preserve those areas for businesses that generate more sales tax, according to the “Chicago Tribune.” The kicker here is Lincolnwood spent five months studying how eight neighboring communities handle their self-storage zoning.
The tax issue, in particular, is likely the reason some cities are beginning to require self-storage be part of mixed-use developments. On the one hand, such self-storage facilities benefit from having businesses and residences in the same development, but they may also be more limited in scope and subject to impractical demands from officials who view storage as the least sexy or agreeable component to these projects.
The next 12 to 24 months should be very interesting for the industry. It’s imperative you understand the local regulatory climate you’re jumping into before investing a lot of time, money and effort. Do your due-diligence. Understand critical factors that go into site selection and city approval. Whether you’re new to the business or a veteran looking to expand, gain perspective on what makes the industry tick and gather insight on market trends and how their likely to affect the value of your investment in the short and long term.
The barriers to entry in some cities may be a bit muddied, but a strategic, knowledgeable approach will help you keep your eyes wide open and give you the confidence to push forward. Please let us know of any development challenges or tricky successes you’ve recently experienced in the comment section below.
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