The Road Less Traveled: Creative Ways to Build More Self-Storage

Just because the self-storage operational model is relatively straightforward doesn’t mean your approach to growth will be simple. Believe it or not, the ability to expand a portfolio often depends on how creative you can be. Times have changed, and the traditional development path now comes with a few more roadblocks. These include moratoriums, increased construction costs, higher interest rates, approval delays, land scarcity, market saturation, and others. The trick is turning these obstacles into opportunities.

The goal of this article is to help you think outside the box and approach self-storage development from a fresh perspective. The following ideas may give you an “a-ha” moment or action plan you haven’t previously considered. Depending on where you are in your journey, you might have already explored some of them.

Conversions

Conversions have been used in the self-storage industry for decades, but now the possibilities are greater than ever because of the rise in e-commerce and decline of brick-and-mortar retail stores, which has left many vacant big-box buildings. We’re also seeing more creative adaptive-use projects in which developers are transforming car dealerships, movie theaters, hotels, multi-family residential properties, factories, warehouses, airplane hangars … The list goes on and on.

The trick is to identify the cyclical nature or decline of other industries and businesses to enhance the emergence of our own. Self-storage has always been opportunistic. If we look in the right place, we can find more windows to open.

Mixed-Use Projects

A mixed-use development approach can also be a catalyst to push a self-storage project over the finish line. The question is how well can we adapt to the future landscape and overcome some of the development challenges mentioned above.

The look of self-storage has changed to mimic office complexes and urban development, with the goal of appealing to what’s desired by planning commissions and communities. This has allowed our projects to be layered in with other real estate uses, in places where we would never have been able to build in the past.

I’ve seen a variety of multi-use projects with various combinations of self-storage, residential, retail and restaurants. Some have even incorporated workspaces, lounges, bars, nightclubs and more. The developers were able to gain special-use permits and conditional zoning because they included what the cities were looking for, all while maintaining a large self-storage component.

Cargo Containers and Portable Storage

Conex boxes or cargo containers have been a game-changer when it comes to creating and expanding self-storage facilities. They eliminate numerous building costs and time constraints that can derail some projects. They’re also ideal for pockets of space that don’t allow traditional buildings or along fence lines to enhance security. Entire projects have even been built from shipping containers! They lead to instant rental income, and sometimes permits aren’t even required.

However, there are some limitations. Cargo containers can be difficult to move and modify, and the aesthetics might not match existing buildings. Fortunately, there are now several companies producing portable-storage containers specifically designed for a self-storage environment. These are customizable and have the appearance of traditional units. They can be erected within hours or days, and are easier to move than shipping containers. They can also be modified to include upgrades such as ramps, shelves and even lighting. They’re more expensive than cargo containers, but they also command higher rental rates.

Niche Storage

Here’s a question: Is niche storage now the norm? I’m referring to solutions including mobile storage, valet storage and micro storage, which are sometimes more in line with the buying preferences and habits of our Millennial and Gen Z customers than traditional self-storage units. The younger generations value convenience, which often comes “on demand.” We see this with Amazon, Carvana, Grubhub, Uber, etc.

In case you aren’t familiar with these products, here’s a quick overview:

These convenience-driven, service-based options appeal to the wants and needs of our growing customer base. Demand for them will continue to evolve. Are these subsegments of our industry in some ways more viable than traditional self-storage? I think so. Will more niches emerge? Maybe.

For example, we’re starting to see a hybrid between valet parking and boat/RV storage in which the customer’s vehicle is handled by facility staff to help maximize square footage. Instead of the tenant driving to their own space, their boat or RV is parked back-to-back with others in a large drive aisle. The customer retrieves their vehicle at the front of the facility upon request. This has the potential to increase rentable square footage by 50% in certain circumstances.

Land With Limitations

With land being a hot commodity, it can be difficult to find viable parcels that make financial sense—unless you’re looking in the right places. Self-storage is so simplistic that it can work almost anywhere. For example, I’ve seen projects built under power lines even though, in most jurisdictions, you aren’t permitted to construct permanent structures there. That doesn’t mean containers can’t go there, or boats and RVs. This is where possibilities live! In my market, there are self-storage facilities under freeway entrances and overpasses. I don’t know many other businesses that can pull that off successfully.

Land Leases

The traditional way to develop self-storage is to buy the land and build. But if the cost of the parcel is prohibitive, why can’t we simply lease it? Especially, if it’s a long-term lease such as 25, 50 or 100 years? I’ve seen projects built on leased open land with a 50-plus year term and others created in the basement of a mall on a 10-year lease. At the end of the day, if it makes dollars, it makes sense. How creative can we be?

More Innovation to Come

What does the future of self-storage look like? Who can say? Struggles fuel innovation, and this is just the beginning of a new breed of product. How we incorporate societal changes into our business model will determine where things go from here. New creations like autonomous driving, artificial intelligence, blockchain technology and others that have yet to be invented can completely shift the dynamics behind industry success.

There used to be a simple path to follow to thrive in self-storage, but as we face new challenges, we must adapt. We must think outside the box (figuratively and, sometimes, literally) and use creativity to open more business opportunities in an industry that’ll continue to grow. Are you ready for a new direction?

Alex Braun II is director of operations for Hawaii & San Francisco Development Co. He’s managed, operated and developed startup and existing self-storage, RV/boat-storage and portable-storage businesses for more than 20 years. He specializes in sales and marketing, employee development, and new-program implementation. To reach him, email [email protected].