All self-storage properties will eventually need capital improvements. Buildings and grounds will suffer from general wear and tear over time, and sometimes you just need to upgrade to keep up with changing times (think technology). For this reason, it’s important to regularly assess your site for potential projects. Let’s discuss what goes into developing a plan, including why these measures are important and their impact on facility value.
Why Make Improvements?
To start, it’s helpful to understand the “why.” As a self-storage operator, you might invest in capital improvements for a variety of reasons. Two very common ones are to attract prospects and improve the customer experience.
Understanding the first impression prospects have when arriving at your property can be helpful in assessing whether improvements are necessary. Welcoming curb appeal, along with modern features, can attract and retain tenants. A project might be as small as adding flower beds out front or as ambitious as adding smart locks to all the unit doors.
Staying competitive within your market is also a driving factor, and understanding what your competitors provide can assist in decision-making. For example, if they offer climate-controlled space and you don’t, it may be advantageous to convert some of your units. If larger units are popular, combining some of your smaller units is a simple improvement that could attract more renters. Ensuring your self-storage facility offers equal or better amenities than competitors also allows you to set higher rental rates, which should lead to higher revenue.
Finally, a common reason to consider capital improvements is to prevent future problems that could be even more expensive. Sometimes spending money now can save more down the road. Similarly, if your strategy is to sell the asset, smart upgrades can increase facility value.
Identify Potential Projects
Now that you understand the reasons behind capital improvements, it’s time to assess the needs of your self-storage facility and make a plan. First, create a maintenance checklist for the site broken into daily, weekly, monthly and yearly tasks. This’ll help you quickly identify areas of need, including whether they require preventive maintenance or a larger investment.
For example, daily inspections might reveal that your gate stop isn’t functioning properly. Detecting the issue early can help you provide an easy fix or enable you to replace the gate before it fails and causes a larger problem.
Another way to identify projects is to ask friends or family to tour the facility with critical eyes. You could also hire a mystery shopper who can provide feedback. These shoppers can provide their first impressions as well as opinions on what the site needs to attract customers.
Finally, shop your competitors for ideas. What do they have that you don’t, such as contactless keypads or nicer curb appeal? Not only can this exercise help you decide on improvements, if you’re finding that other facilities in the area lack key features and benefits, perhaps upgrades at your facility would allow you to command higher rates.
Determining a Good Investment
When deciding which upgrades to make, the following four-question test can help you determine if a project is worthwhile. Though return on investment must be positive, any improvements must also make sense for the facility and market.
1. Will the project improve close rates? Would this upgrade attract new customers? Having features that are distinguishable from competitors can improve conversion rates.
2. Will it improve customer satisfaction? If tenants are happy, they’ll stay longer and leave better reviews; and positive reviews are part of the formula to rank well on search engines and attract more business. Improvements can also demonstrate your company’s value and commitment to current customers.
3. Will it prolong the life of the asset? If the project is preventive or good for the long-term health of the property, then the costs are likely justifiable. Anticipatory measures can mitigate more expensive fixes down the road and help decrease capital expenses over time.
4. Will it make the property more attractive to buyers? If your long-term strategy is to sell, capital improvements can raise facility value, commanding a higher sales price. In addition, they can help justify higher rental rates, which improves cash flow and makes the asset more attractive to buyers.
Here are a few final tips to keep in mind when considering capital-improvement projects.
Pay attention to market dynamics. Besides surveying what your competition is or isn’t doing, keep an eye on other factors shaping your market, such as future residential and commercial developments in the pipeline. These could drive the need for additional self-storage or lead to necessary projects at your facility.
Build relationships with trustworthy vendors. When gathering bids for a project, ask vendors for references and work examples. You want to ensure anyone you hire is looking after your best interests.
Establishing a good relationship can also lead to good referrals for other types of projects, helping you create a service-provider network you can lean on to get the best quality workmanship. Trusted partners can also make insightful recommendations on preventive measures or possible upgrades. Once you’ve established a network of providers, maintain communication with them to help strengthen trust.
Have a master plan. When considering potential self-storage upgrades, it’s important to develop a comprehensive strategy. This’ll help you budget and prioritize, which makes implementation seamless. Identifying the why, how and return of each improvement will help make your capital projects far less daunting.
Tom Heick is the facilities-improvement manager and Melissa Stiles is director of marketing for Storage Asset Management, a property-management and consulting company that specializes in self-storage. The company manages more than 300 properties along the East Coast. For more information, email [email protected].