Building Your First Self-Storage Facility: Understanding Development Fundamentals

To successfully develop your first self-storage property, you must choose the right site and design the correct unit mix and layout. Sounds simple, right? Not so fast. Read more about these fundamentals and get advice on how to achieve optimal results.

July 20, 2018

5 Min Read
Building Your First Self-Storage Facility: Understanding Development Fundamentals

By Jeffrey B. Turnbull and Lucas J. Turnbull

The goal of any self-storage development should be financial success, and the best way to accomplish that is to carefully plan the basics: site selection, unit mix and layout. To many first-timers, the industry business model is simple: Buy land, build and make money. Once upon a time, it was almost that easy. Today, it’s much more complex.

Many markets are experiencing greater competition, higher land and building costs, and additional regulatory burdens. We’re seeing the use of more climate-controlled and multi-story buildings, due in part to trends in consumer demand. As a result, self-storage facilities are becoming much more expensive to develop, with longer lease-to-stabilization times. Even so, they continue to be a solid investment choice.

Choosing the right site and creating a well-designed unit mix and layout is critical, especially for a first-time developer. These are the fundamentals of a successful storage business, whether you’re building your first or fifty-first facility.

Site Selection

Site selection is the most important factor in determining success. You generally want a location that’s highly visible, with good access, on a major road. The site should be in a high-growth area or one that’s clearly in the path of progress. In addition, you need a good combination of demographics, with higher than average household income and population growth in a three-mile trade area. Finally, the location should have minimal existing or planned self-storage competition, particularly within that first mile.

If you’ve discovered an area that’s underserved, chances are other developers have noticed it as well. Check with the local building authority to see what’s headed that way before you start to develop. You don’t have to let competitive forces sway your decision, but be aware of all existing and planned projects.

Of course, the property must be large enough for your planned development and have access to the proper utilities, such as water, sewer and electricity. It should also be properly zoned.

What’s important is you understand that not all land is good for self-storage. Just because you inherited it or bought it at a bargain doesn’t make it a desirable location. A good site must have the above attributes. If it doesn’t, you need to keep looking for one that does.

Typically, a single-story development might require 3 to 5 acres, depending on topography and shape. A multi-story site will come in at 2 acres or so. Always have an exit strategy for any site you choose, with the ability to terminate the contract if the permitting or zoning doesn’t go your way. The bottom line is the ideal site gives you a high level of comfort.

Unit Mix

Self-storage unit mix is normally a product of population density and income levels. For example, areas of higher income will typically demand more security and climate-controlled features; apartment dwellers will want smaller units, say 5-by-10s; and suburban or commercial-oriented markets will call for more large spaces, such as 10-by-20s.

It’s important to note that your financial return per square foot (PSF) usually diminishes as the size of the unit increases. For example, if your market will support $70 for a 5-by-10, you’re achieving a rental rate of $16.80 PSF. It’s doubtful the 10-by-20 will support that same rate. This doesn’t mean you should build a higher proportion of smaller units, though. A store with 50,000 net rentable square feet might have more than 500 storage units or as few as 300, depending on the market. You must build the unit mix to the market, not to skew the PSF return.

Site Layout

To discuss site layout, let’s focus on single-story, as it would normally be easier and less costly for a first-time developer to build. During the layout process, we typically involve a professional civil engineer with experience in self-storage design, which can be invaluable. The goal is to maximize the net rentable square footage. You need a site that’ll accommodate a minimum of 50,000 square feet, constructed all at once or in phases.

The layout is primarily a product of the shape and topography of the land parcel, but many other factors come into play, including:

  • Fire code and use of fire equipment (with the possible requirement of automatic fire-suppression systems)

  • Storm-water rules in your municipality

  • Other local zoning rules with setbacks and landscaping requirements

We normally factor in all the setbacks, easements and storm-water restrictions first, and then sketch the layout. Next, we try to determine how much climate-controlled vs. non-climate-controlled storage can fit on the site. Then we look at accessibility to each of the buildings and individual units, ensuring it’ll be easy for customers. If it isn’t reasonably simple for tenants to drive in, get to their unit and store, they’ll go elsewhere.

The takeaway is you need to find the right site and design the unit mix and layout based on the market. Doing your research and spending time with professional engineers and planners will help you succeed in your first self-storage development. Remember, it’s a process that’ll involve a considerable amount of your time and money, but the reward will be worth it.

Jeffrey B. Turnbull is president of Kodiak Mini Storage II LLC. He’s been involved in the self-storage business as a developer, operator and owner for more than 20 years, and is currently developing a new store in Charlotte, N.C. He’s a licensed attorney in North Carolina, a licensed real estate broker in North and South Carolina, and a past president of the North Carolina Self Storage Association. He’s a regular contributor to “Inside Self-Storage,” and a speaker at various industry events. To reach him, e-mail [email protected]

Lucas J. Turnbull is a project manager for Kodiak Mini Storage II LLC. He’s overseeing the construction of a new 65,000-net-rentable-square-foot facility in Charlotte, N.C. A graduate of Clemson University, he’s a licensed real estate broker in North Carolina. To reach him, e-mail [email protected]

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