Devon Self Storage has served customers for more than 27 years. In that time, we’ve redeveloped more than 60 commercial real estate properties to self-storage. These conversions have included big-box retail locations, car dealerships, strip malls, furniture-manufacture sites, office buildings and even a seafood-processing plant.
We’ve also transformed more than a dozen former Kmart stores, with the most recent in Grand Rapids, Mich. To provide some insight and advice, here’s a quick overview of the project and few of our key development philosophies.
Opportunities and Challenges
The 94,000-square-foot building is ideally situated on a major street traveled by 33,000 vehicles daily, providing maximum exposure to customers. It’s also adjacent to a heavily used Lowe’s home-improvement store, whose parking lot averages 5,000 vehicles per day.
Within a three-mile radius of the site are two older self-storage facilities with an average occupancy of 88 percent. Both offer exterior units only, none that are climate-controlled. Limited competition for a radius population of 28,400, with an average household income of $106,541, highlighted the void in supply. We stepped in to fulfill market demand.
Six months after acquiring the property in October 2019, the coronavirus hit, impacting construction. Regardless, we successfully converted the building in 10 months. It received its Certificate of Occupancy in July for an Aug. 1 opening, which was two months ahead of schedule.
The finished facility comprises 82,000 net rentable square feet in 820 units. It includes controlled access, climate-controlled units and an indoor drive-through. Additional features include security cameras, restrooms, and retail center selling locks, boxes and other moving supplies.
Though we budgeted an average monthly rate of $1.20 per square foot, units are renting for $1.56 per square foot due to initial high demand. From Aug. 1 to Oct. 28, we rented 106 units, and occupancy has increased daily. We forecast the property to achieve stabilized occupancy by September 2022.
By way of guidance, here are three tenets to our conversion philosophy:
Think outside the box. Be innovative. We’ve always been a proponent of self-storage conversions, and it has been our experience that they provide better streetscape locations with ideal access for customers. A successfully completed conversion can be less expensive and completed in a shorter timeframe than ground-up development. Conversions also compete well with any newly constructed facility.
Devon Self Storage in Grand Rapids, Mich.
No zoning = no purchase! Whether you’re looking to acquire a property for conversion or build from the ground up, the necessary zoning must be in place prior to closing.
Know the market. Drive it, walk it, read up on it and know your customer. Thorough market knowledge is critical with respect to market competition, rental rates and traffic patterns. Study the market and know the supply-and-demand ratio!
Kenneth E. Nitzberg is chairman and CEO of Devon Self Storage Holdings LLC, which operates 50 facilities in 19 states, with a market value of more than $250 million. Based in Emeryville, Calif., the company employs approximately 120 people. For more information, visit www.devonselfstorage.com.