A feasibility study is one of the best tools you can use when considering a self-storage development. When done right, it’s a treasure trove of information that provides insight to the viability of a potential project. The knowledge you gain should help convince you to either move forward or walk away with confidence.
That said, not all feasibility studies are equal. There are a few areas of analysis that any thorough report you commission or conduct must include to be useful. Following are the ones that’ll best assist in your decision-making.
Information about self-storage facilities in the target area is critical to determining site feasibility. To understand what’s needed in a market, you must understand what’s already there and identify any gaps you might be able to fill. Your report should address competitors’ rates, promotions, administrative fees, deposits and waitlist availability. It should also unearth any incoming locations that could impact the viability of your parcel.
A rental-rate analysis provides an in-depth look at your competitors’ pricing. A good summary should include unit types, price ranges and historical data. This section plays a big role in helping you build a case for whether the market has room for another contender.
Occupancy rates will tell you how many people are actively using the self-storage facilities in your area and the available capacity at competing sites.
One of the best ways to compete is to fill gaps. With an amenities analysis, you can see what other self-storage operators in the area are offering. If enough competitors lack a valued product or service, that’s your opportunity to address an underserved pain point.
Finally, a marketing analysis examines the character of local competitors. What types of reviews are they getting online? How do they act on the phone? How accommodating are they with their customers? From these insights, you’ll get a good idea of what you could bring to the table to distinguish yourself in the market.
Knowing who your potential self-storage customers are is just as important as identifying your competition. Age, race, ethnicity and lifestyle data can contribute to development decision-making in multiple ways, from identifying the best unit mix to pricing choices to operational budgeting. From managing expectations to meeting specific needs, it pays to know who lives in your backyard.
Two commonly used measurements of self-storage demand in an area are square feet per capita and square feet per household. However, these aren’t the most reliable indicators. They won’t paint a true picture of unmet demand and oversupply. There are plenty of markets with a lot of self-storage per person that can still support additional space. There are also markets with a low amount of supply per capita that won’t produce a strong return on investment. Your feasibility study should put this information in context with more crucial demand drivers.
When you’re looking at the feasibility of a potential self-storage location, it isn’t simply about the quality of land or the number of units required to turn a profit. It’s about choosing a place that serves the community, maximizes your chances for success, and presents future opportunities. This is why it’s important that your market study include data drawn from multiple trusted sources such as industry databases and publications, government resources, independent consumer-research, and others.
A comprehensive analysis should paint a clear picture of whether or not your proposed self-storage development would thrive. The data included can make or break the outcome. It’s much like an artist using a photo as the basis for a painting. With a full breakdown of relevant competitive and customer information, a feasibility study should help you sidestep the paralyzing “blank canvas” and allow you to move forward (or step away).
A thorough self-storage feasibility report should also include a SWOT (strengths, weaknesses, opportunities and threats) analysis of your proposed project, to help you focus your efforts and understand what your plan should look like moving forward. Here are some other details and recommendations it should offer:
- Annual projections for cash flow based on the potential unit mix, rental rates and lease-up rate. This data gives you an idea of the project’s earning potential and return on investment.
- Estimated expenses for managing, maintaining and marketing the property. A cost analysis is typically built by using local property taxes in conjunction with current industry standards.
- Marketing tactics designed to help you meet and exceed financial projections. With a game plan at hand, you can get in front of more people quickly and create a rock-solid brand identity through promotions that also spread the word about your business.
There are many advantages to commissioning a feasibility study for any potential self-storage project, from enticing investor interest to creating personal peace of mind. Think of this report as a steadfast companion with which you can traverse the winding—and often tumultuous—roads one must travel when developing a facility.
Consider the state of mind you wish to be in throughout your journey: frazzled and unsure, or confident and competent? A well-researched, well-crafted self-storage feasibility study will help you arrive at an impartial, educated and strategic answer.
Katherine D’Agostino is the founder of Self-Storage Ninjas, a self-storage feasibility-consulting firm. A former marketing-communications executive turned sensei, Katherine has a background that includes 24 years of creating and implementing business plans for a wide range of companies. A self-storage developer and owner herself, she focuses on delivering unbiased reports that enable investors to make informed decisions. To reach her, call 402.570.5021; email [email protected].