One of the challenges of developing a new self-storage facility is finding the right location. Ideally, the business should be highly visible, located on a busy road close to potential clients. A great price and regular parcel shape are helpful, and proper zoning is critical. In many markets, though, you’ll find the only available land is at the edge of town or in areas already saturated with existing storage facilities.
One way to overcome this is with a conversion project. Conversions provide the opportunity to put your business in established areas where demand exists but not vacant land. Local government may be more likely to grant building approvals if you’re redeveloping a vacant or blighted property, and you’ll have the advantage of starting with a structure where utilities are already present.
What makes a property ideal for a self-storage conversion? I’ll discuss that below, as well as what it takes to plan and build such a project.
Find the Right Property
A primary goal for any self-storage developer is to build where there’s adequate demand. In the case of a conversion, is the existing structure in a market with sufficient population to support the project? If you’re looking at an established neighborhood, it’s less likely that more people will move to the area and grow the market, so you’ll want to be sure there’s plenty of product demand.
Next, does the building have good visibility? High traffic counts and visibility from main roads promote faster lease-up. Visibility without great access can be OK if there isn’t competition nearby, as customers will still find you if they need you. Luckily, most vacant retail buildings have great locations and access, while industrial buildings might not.
Is the property close to residential areas? Your tenants will most likely find you by searching on the Web, many via their smartphones. Google and Siri will show them the storage options closest to them, and many will simply rent from the first place they call. Being close to homes and apartments is very important.
Another consideration is whether there’s enough space to be profitable. Most conversion facilities have a management office and manager, which means the site needs to be large enough and generate enough income to cover that employee’s salary. Alternatively, a satellite or unmanned location can be run from a kiosk or remote office, allowing you to develop a smaller facility. As you examine properties, look to see if there’s excess land where new storage buildings could be erected, or whether there are outlots that could sold.
Self-storage typically doesn’t require as much parking as other businesses, so if the property has a large parking lot, it may be possible to develop additional buildings in that area. Building height may also enable additional space. If the structure is 18 feet or higher on the interior, it’s ideal for two stories. By the way, 16 feet is the absolute minimum that can work, and only if you use swing doors on the units instead of roll-ups.
Finally, think about municipal approval. Will the city allow the existing building to be converted to self-storage? New developers—not to mention real estate agents selling vacant properties—tend to underestimate the difficulty, time and cost of trying to build a location that isn’t properly zoned. Spend the time to research which zoning is required for self-storage and discuss with city officials the process (and likelihood) for obtaining any necessary conditional-use permits should you move forward with an acquisition.
Estimate Expenses and Income
Once you find a suitable property, it’ll take a lot of work to turn it into a storage business. Will it make money? To answer that question, you’ll want to work up some rough cost estimates for the building components, demolition and any major rehab.
Income is easier to calculate. You can assume that about 80 percent of a single-story conversion will be rentable. Survey nearby facilities to determine local rates for climate-controlled units and generate an estimated revenue per square foot. You might discount during rent-up, but if you have a good location with an edge over nearby competitors, you’ll usually be able to charge premium rates.
Developers who are new to self-storage are often dismayed by the amount of money it takes to get started, even with a conversion. To get construction approvals, you’ll typically need to hire professionals to draw up your plans. This money will come from your pocket, as banks won’t give you a loan until you have plans approved by the city. You may also need a civil engineer to work out stormwater or traffic concerns, and you’ll typically need an architect to help with the building rehabilitation and any façade changes.
Formulate a relatively detailed plan before asking contractors for bids. By providing as much information as possible to suppliers and subcontractors, they’ll be able to provide more accurate bids with fewer surprises later. You’ll also stand a better chance of having true apples-to-apples comparisons on multiple bids if everyone is bidding from the same specs.
As you create financial projections, think first in terms of cost and revenue per square foot. As your plan takes shape, replace your rough estimates with solid numbers, backed by quotes from your subcontractors. Once these are in place, you can create a more detailed income projection based on the actual unit mix and rates. Keep in mind that changing your plans after financing is in place and construction has started will cause delays and run up expenses.
Assess the Building
The construction requirements of a self-storage conversion will vary depending on the condition of the building and scope of the changes. Here are a few key items to examine.
Let’s start with the exterior. The roof is a major item that may need attention. Most projects will also require some revision to the loading/unloading area and entrances, which may require the installation of automatic doors and access control. New signs, paint and aesthetic improvements are typically part of the renovations. The site may also need new driveways or parking. Landscaping and exterior lighting may need to be addressed.
Inside the building, demolition is generally the first order of business. Removing unnecessary walls will open the space to prepare for self-storage. Pay attention to the floor. Stripping tiles, grinding away imperfections and filling holes can be a major undertaking. The remaining walls and ceilings are usually painted white for a clean start. This is best done before bringing in new materials.
If the HVAC system needs updating or replacement, this is also easiest to do while the building is empty. Adjustments to the lighting system should follow, which typically involves the installation of new, motion-activated banks of lights over the hallways. Most projects will also include installation or reconfiguration of sprinkler systems. Don’t assume the existing sprinklers are adequate, as self-storage may be considered a higher fuel load than the previous use. Other interior tasks will likely include remodeling restrooms and creating or renovating an office.
Design the Space
With other prep work and mechanicals out of the way, the project will finally be ready for the storage units. The unit mix for interior self-storage typically consists of smaller units than one used for traditional projects. While drive-up buildings may include large spaces for storing cars or boats, most conversion units are limited to items that can be carried through a hallway. If clients need more space than your biggest unit, they can rent multiples. Any large units you do have are often placed closest to the entrances or loading bays.
Here are some other design considerations and suggestions:
- Design an alcove near entrances and loading docks to store carts for customer use.
- Storage units can be accessible by roll-up or swing doors and are available in a range of heights.
- Welded wire mesh is typically applied over the top of units.
- During the planning process, identify any existing walls that need to be lined with steel. Your hall/partition supplier can provide additional panels to hide any exposed insulation or other surfaces that need to be concealed.
- If the project includes a mezzanine (second floor), that’ll add some complexity. These projects typically include an elevator and a poured-concrete second-floor deck. Sprinklers are usually needed to cover all levels.
- Consider adding a bank of windows facing the street frontage with roll-up doors behind them. Visible doors will help promote the property, especially at night.
- Among the last items to be installed will be camera systems for security and access control.
The process to create a conversion may sound simple, but there’s a significant amount of planning and work to carry it through to completion. But, with the reward of a beautiful new facility in a great location, it’s often a great investment.
Steve Hajewski is the marketing manager at Trachte Building Systems, which designs, manufactures and erects a full line of pre-engineered and customized steel self-storage systems, including single- and multi-story, portable storage, interior partition and corridor, and canopy boat/RV. He also owns a self-storage facility in Wisconsin and is a frequent contributor on Self-Storage Talk, the industry's largest online community. For more information, call 800.356.5824; visit www.trachte.com.