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Getting StartedSelecting a good site for a new self-storage business

July 1, 2000

8 Min Read
Getting StartedSelecting a good site for a new self-storage business

Getting Started

Selecting a good site for a new self-storage business

By Harold Leslie

In today'smarket, it is more important than ever to do your homework before investing in a newself-storage project. Unlike the early days of self-storage when you could build a projectand expect it to prosper with little or no market study, today you must take an educatedapproach to your project planning or risk losing large amounts of your hard-earned money.So, plan to spend at least $3,000 to $5,000 to develop information that allows you to makethe right decisions--whether to stop or go forward with a project.

Some areas of the country are now overbuilt, with too many available square feet ofstorage and too few consumers. There are many resources available to the prospectiveself-storage owner that can tell you whether a site would be profitable, or if it is onethat would fail.

I recommend using demographics/ market-research companies and consultants that work inthis industry to tell you who are the available customers in an area, what is their meanincome, what is the daily traffic count past the location you are looking to develop, whatare the statistics and, if an area is growing, how fast. Also important is information onexisting storage facilities (prices and occupancy). These facts will guide you, not onlyin the initial choice of facility location, but it will give insight in preparation ofunit mixes, what size facility to build and how much you may be able to charge for youravailable units. Many market-research companies offer packages tailored to theself-storage market.

One useful source of information is the Inside Self-Storage Factbook. This ispublished annually each November and contains information on financing, real estate,development, marketing, consulting and other aspects of the self storage business. Alsoavailable is MiniCo's Self-Storage Almanac, an annual, statistical abstractcontaining information on topics such as unit mix, rental rates throughout the country,construction costs, population traits and more. It may not give you the exact informationyou need for your specific site, but it can give you an overview of self-storage industrystatistics nationwide. If you have no previous self-storage experience, you may find boththese publications to be most informative.

Another available tool is the use of industry experts. Attend the trade shows that areheld throughout the year. There are self-storage development seminars and workshops heldregularly, sponsored by several of the major industry publications (including this one).Watch for events in your area of the country. While attending, make good use of theexperts available to you. Listen to the speakers and talk to other attendees. Keeping upwith the changing trends of self-storage will allow you to build a facility that will meetthe needs of your customers 10 years from now, not just today.

Site Selection

Once you have determined where your project should be located, there are some otherimportant aspects to consider. A "good site" for self-storage should be:

  1. Located on a major traffic artery.

  2. Located between dense multi-family residential areas and retail locations.

  3. Located on the "going home" side of the road, if possible.

  4. Zoned for self-storage use by virtue of being eligible for a special-use permit.

  5. Depending upon population, the nearest competitor should be no closer than 3 miles. If this is an urban site, it can be as low as 1 to 1.5 miles.

When looking to purchase a parcel of land, you must know what you can pay and still becost-competitive. I use the 66 percent rule of thumb developed by Bruce Manley and BuzzVictor, two of the founders of the self-storage industry. (See "The 66 PercentRule.")

The 66 Percent Rule

Find the average annual per-square-foot rate for a 10-by-10 and 10-by-15 storage unit. Multiply by .66 (calculate 66 percent). The result is the most you should pay (per foot) for ground.

Example:
10x10 rent = $85/month x 12 months = $1,020
Divided by 100 square feet = $10.20 per square foot

10x15 rent = $98/month x 12 months = $1,176
Divided by 150 square feet = $7.84

Average= $10.20 + $7.84 divided by 2 = $ 9.02 per square foot
Multiply total by .66 = price for gross square foot of land = $5.95

Also, the building-to-land ratio of your project, including water retention, drives,setbacks, etc., must be in excess of 40 percent. For example, a site of three acres(130,680 square feet) must produce a minimum of 64,272 square feet of rentable storage.

Of course, in the process of purchasing a parcel of land, you will need to use a goodtitle-search company that will find any recorded easements, highway right-of-ways, utilityeasements and service-access easements that you would need to be aware of beforepurchasing the land and planning your buildings.

Another factor to be aware of before signing the contract on a parcel of land is thestate of the land itself. What kind of business was there before? You should invest in anenvironmental assessment before making a commitment on the land, particularly in urbanareas. A professional environmental and geo-technical assessment will include several keycomponents:

  • An inspection of the physical characteristics of the property and surrounding area, including topography, geology and hydrology.

  • A review of all reasonably ascertainable historic records.

  • A review and inspection of the current condition and uses of the adjoining properties to identify the presence of any environmental conditions or regulated activities that may have a negative impact on the property.

  • A review and inspection of the current condition and uses of the property, including compliance with appropriate regulations.

  • Soil borings collected using a geoprobe drill rig. These samples are to be carefully handled and tested in a laboratory for the presence of harmful contaminates.

  • A full written report completed by an environmental-evaluation firm including conclusions and recommendations.

While it may sound somewhat extreme to go through all of this, it can save you frombecoming responsible for cleaning up a toxic-waste dump left by a prior owner, or beingstuck with a piece of land that you cannot build on economically (or at all) due to poorsoil conditions. Also, be mindful that it will be difficult (if not impossible) to obtainfinancing on a substandard site.

Permits and Zoning

There are issues to be reckoned with that relate to community acceptance ofself-storage. Many areas are now requiring elaborate architecture or expensive facades tomake the facility blend with existing structures and surrounding architecture. Zoning andplanning boards must be approached with an eye toward education in the advantages ofhaving adequate self-storage available in the community. Following are some benefits youcan point out while presenting your case for allowing a self-storage project to goforward:

  • Self-storage operations are quiet. It's a good buffer.

  • It creates very little traffic.

  • It has no impact on utilities.

  • It has no impact on schools.

  • It provides good tax revenues.

  • It's a community service.

You will also need to be informed on the community standards for construction, such asallowable coverage on your land, building set backs, parking requirements, minimum drivewidths, sign limitations and setbacks, landscape requirements, water use and storm-watermanagement, etc. The better informed you are about these issues before you buy a piece ofland, the better you will be able to design your facility correctly the first time,without costly changes after plan review.

Site Design

After you have settled on where you will build, you must design the facility. Look foran engineer or architect who already has experience in self-storage. The uniquerequirements of storage projects, both in current building techniques and in conformity tocodes, can be tricky. You want someone designing your facility who already knows whichhoops to jump through. You do not want to have to pay while this person learns the ins andouts of self-storage. There are special code requirements for building separation, firecodes with special requirements for storage, and certain mandatory requirements as to hallwidths and maximum travel distance between exits, etc.

When you have a preliminary plan ready, you will have to take it before the buildingdepartment for permitting. In most cities and towns across the country, it would seem thatmost bureaucrats disseminate misinformation and inaccuracy. We have found that, in manycases, municipal employees feel it is their job to be adversarial rather than helpful.This is particularly true when it comes to providing answers that require interpretation.The following tips help to approach the bureaucracy.

  • Be courteous.

  • Be honest about what you do and do not know.

  • If you cannot make the progress you want to make on your own, consider the services of an attorney, architect or engineer. But again, anyone you choose out of those three disciplines must have previous self-storage experience; you do not want to be the one paying to educate them.

After you have selected a site and had preliminary drawings made, you must bear in mindthat, realistically, the occupancy rate of your facility after 18 months of operation mustexceed 80 percent to achieve stabilization. If you fail to select a viable site, you mayfind yourself paying the mortgage out of your own pocket. If that continues for more than18 or so months, you may find your financiers looking over your shoulders in a mostunpleasant way.

So, make sure to do all of your homework before proceeding on an investment of whatcould easily amount to over a million dollars. Don't think you can do it on the"cheap." Paying a few dollars before you build may save you much more later inthe development of your self-storage project.

Harold Leslie has been involved in the self-storage industry for more than 28 yearsand is considered one of its founders. He was instrumental in the early development of theSelf Storage Association, and was a pioneer in the development of standing-seam roofsystems and computer-aided design (CAD) use for unit mix and design. Mr. Leslie currentlyserves as president of Leslie Industries Inc., a design and engineering firm, which leadsin the development of climate- control self-storage and has completed more than 50 millionsquare feet of self-storage projects to date. Leslie Industries' European affiliate hascompleted more than 5 million square feet of building conversions to self-storage in GreatBritain and the continent. He also is the owner of five self-storage facilities in theUnited States.

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