If you’re consistently achieving high occupancy and solid rental rates at your self-storage facility, you might be tempted to let maintenance and capital improvements slip. “If it ain’t broke, don’t fix it,” as the saying goes. But there are reasons why it’s in your best interest to keep your property up to date.
The first is new competitors are constantly entering the market. Just because you’re comfortable with your current performance doesn’t mean you’re safe. If a new self-storage facility opens in town, it’ll draw new customers who’ve never rented a unit before, but it’ll also pull business from lower-quality sites. A long-term tenant of an older property who’s only ever seen it age with no meaningful improvements may be tempted to move to the shiny, new business down the road, even if it costs a few extra bucks a month. Investing in curb appeal, maintenance and upgrades can help you retain current customers and future market share.
Another reason site upkeep is so important is deferred maintenance can snowball. If a tenant dents his unit door, it’s a pain to have it fixed or replaced. It’s just a ding, so why bother, right? But a small dent can rust and create a bigger problem. It also tells tenants you don’t care about the condition of your property. And if you don’t care, why should they? They can be careless when backing up their vehicles or moving heavy items into and out of their units. After all, you aren’t fazed by damage, so why should they be careful?
If this goes on for too long, you can have a real problem on your hands. And rest assured, it’ll be much more expensive and time-consuming to repair than if you’d just taken care of it in the beginning.
Another reason to care about facility maintenance and upgrades is customer experience. Tenants want to feel good about the place where they store their belongings. The keyword in that sentence is feel. What do prospects perceive when they arrive at your self-storage property? Does it come across as safe, clean and welcoming? Feelings are intangible, but small improvements can influence them.
Simply put, the better a storage facility looks and feels, the more customers it’ll attract. This will lead to higher occupancy, better tenant retention and a more profitable, valuable asset.
Condition and Value
If you ask five self-storage professionals to define the difference between class-A, -B and -C facilities, you’ll get five unique answers. The truth is these distinctions are subjective, and yet they can have huge implications for your business. Here are some basics to understand:
- Class-A facilities are valued at lower capitalization (cap) rates than class-B, which are valued at lower cap rates than class-C.
- Class-A facilities often get better financing—interest rates, leverage, other terms—than class-B and -C.
- Many buyers are only interested in class-A or -B properties and won’t touch class-C.
If you can make some upgrades to bump your facility up a class, you’ll be opening a whole world of new possibilities. If you take a class-C facility and repaint the buildings, pave the driveways and add fencing, you could easily be considered a class-B facility. During an appraisal, your asset might command a 5% cap rate instead of 6%. If your net operating income is $100,000, that would be taking the value of your property from $1.6 million to $2 million. That’s a 25% increase just by being bumped from class-C to -B in the eyes of an appraiser or lender.
So, now you know a lot of reasons to make improvements to your self-storage property. But what projects are worth the time, energy and money? Following are some upgrades to consider.
Don’t feel like you have to jump to the more expensive upgrades right off the bat. Sometimes, it’s possible to put lipstick on a pig. Start by looking at your self-storage property through the eyes of a potential tenant. Are your parking lot and front entrance clear of weeds? Are your glass doors and windows free of steaks and fingerprints? Are your keypads and other access points in good working order? Is the management office clean and tidy? Do you need to repaint anywhere, or repair any dents?
Focusing on small, inexpensive items like these can make a big difference in curb appeal and a tenant’s inclination to rent with you. More rentals mean higher net operating income, which becomes higher facility value.
For a little more money, the following projects can meaningfully upgrade your self-storage facility and its value:
- Paint. If your building exteriors, hallways or doors are looking worn, paint can refresh their appearance. For the sake of longevity, consider adding a restorative coating designed to withstand wear and tear.
- Unit doors. These take a lot of abuse over time. Consider replacing difficult locking mechanisms, bottom seals and handles, as these tend to wear out quickly. If your doors don’t come with enclosed, lubricated springs, you’ll have to inspect them and conduct regular tune-ups.
- Parking lot. Asphalt can look worn after a few years. Sealcoat won’t only give it that rich, dark appearance, it extends the lifespan. Along with this comes new striping for parking lines.
- Landscaping. A little can go a long way in improving facility curb appeal. Consider how you can add plants, shrubs, trees or flowers to spruce things up a bit.
- Unit-mix adjustments. If you have a unit size you’re struggling to rent and your spaces have moveable partitions, consider creating new unit sizes. For example, if your building is 40 feet deep with back-to-back 10-by-20s, consider changing them into 10-by-10s and 10-by-30s.
If you have the need and budget, larger capital expenditures can be pursued to greatly enhance your self-storage asset and its value. Consider:
- Lighting upgrade: LEDs can be expensive up front, but there are often rebate programs to help offset the cost. They’ll brighten your facility and reduce your utility costs.
- Roof restoration or replacement: This is imperative if you experience recurring leaks. A project like this is expensive, but it’ll profoundly increase the value and longevity of your self-storage investment.
- More modern security: Consider upgrading your gates, keypads and cameras. Most modern systems are cloud-based, meaning everything can be controlled remotely from your phone or computer. This bolsters security and convenience for you and your tenants.
- Better signage: Consider retouching your signs or replacing them. Well-designed, backlit signs are critical. It may even be time for a brand refresh.
- Office renovation: Not only will this modernize the appearance, staff and tenants will be more comfortable.
Take an honest, tenant-oriented perspective of your self-storage facility and ask what can be upgraded to elevate its value. Determine a budget, then start from the low-hanging fruit and work your way up.
Derek Walker is a principal of self-storage consulting firm Box Pro, which specializes in self-storage feasibility studies. He also develops and manages properties for Storage of America, which operates 25 self-storage facilities in five states. To reach him, call 801.839.5844 or email [email protected].