It used to be you could build a self-storage facility almost anywhere and the business would eventually succeed. That’s no longer the case. Our industry has matured, and we now need a much more precise approach to site selection.
The truth is, you’ll probably never find that “perfect” development site; but the more positive attributes a parcel has, the better. Below, are the eight factors I use for my selection criteria. My goal is to tick the box next to each. If I find during my analysis that I’m missing several, I move on to another option.
Visibility on a Major Road
Your future self-storage tenants must be able to see the facility from a major road. A site at street level or elevated slightly above works best. This is pretty much an all-or-nothing concept. If you won’t be able to see the building when you drive by, it won’t have sufficient visibility. It’s that simple. Your facility will perform better in the long run if it can be seen from the road.
Accessibility and Traffic
Your potential self-storage site needs full-access turn movement, in and out. There are many successful right-in and -out sites, as well as right-in-only properties with separate exits or U-turn-accessible sites. Whatever you choose, you want customers to be able to turn into your facility and park with ease. It should be visually intuitive. If it isn’t, they may look for a more convenient alternative.
In addition, if the site is along a major road, you want a good volume of traffic that’s moving fairly slowly—in other words, a speed below 45 mph. This goes back to visibility and ease of access. If your customers are risking their lives to enter or exit your property because traffic is moving too fast or the land is on a highway with no exit nearby, they’ll eventually go elsewhere.
All potential self-storage sites need to be evaluated in terms of soil conditions, topography, shape, orientation, stormwater rules and vegetation. Keep these things in mind:
- It’ll be much more expensive to build on a site with poor-quality soil. One with topographic challenges may require additional grading or building engineering, which adds costs.
- I’ve never worried too much about the shape of a parcel because you can work buildings into even an irregularly shaped site. However, it’s much easier to build on one that’s square or rectangular.
- If the site has lots of street frontage, that’s great for visibility, but it can sometimes be bad for buildability. Setbacks can greatly reduce the amount of useable property and may require additional landscape or expensive street enhancements as part of the approval process.
- If I’m looking at a property for a series of single-story buildings as opposed to a multi-story, climate-controlled structure, I always look for a north/south orientation to help with the melting of snow and ice in the winter months, even in the Southeast.
- As for stormwater, I make sure the site is large enough to accommodate the rules and normally arrange any detention ponds in the rear.
One final note concerns vegetation. I love trees, but they’ll always be an issue for your self-storage development. Many municipalities will prevent removal of certain kinds during site work or require additional planting if a certain type is removed. Of course, when a large tree is near a self-storage building, it’s a potential problem.
During your initial analysis, you need to look for the availability of utilities such as water, sewer, fire hydrants, electric power, natural gas, phone and Internet. These are fundamentals you need available to your self-storage site. Hopefully, they’re in place and discoverable during your acquisition due diligence. If you’re in an emerging market, it isn’t uncommon to need water and sewer lines brought to the site, and this can be expensive. Be careful here, or your construction costs will escalate quickly.
The first rule here is to find a site that already has the necessary zoning in place to accommodate self-storage, though most projects now require special approvals from the local municipality. Sometimes it’s a straightforward, easy process; other times it’s time-consuming, complex and expensive. It’s best to talk directly with the city’s planning and zoning staff to get at least an idea of what’s involved. Obviously, certain zoning classifications, such as commercial or industrial as opposed to residential, will give you a better chance at success.
Demographics and Competition
For a profitable self-storage business, you need plenty of people living nearby, with healthy household incomes. I look for an average income level well above the national average and a large population that’s growing rapidly within a three-mile radius or at least a reasonable drive time. These two factors are important.
The demographic analysis is always coupled with a competition analysis. You need adequate market demand to accommodate your new site, and rental rates that make it financially advantageous to build. It’s difficult to find a site that doesn’t have some level of competition. The trick is to find one that with only limited competition relative to the overall market. Normally, if other storage operators in the area have strong pricing, limited discounting and high occupancy, it indicates a good opportunity for a new facility.
You want a self-storage development site in an area where the growing population is headed. How do you know where that is? Look for new or expanded water and sewer lines, road widenings, and new-housing construction, particularly multi-family. Sometimes municipalities build new parks or reserve land for schools in anticipation of growth.
Also, look for a nexus to new, existing or expanded retail centers, convenience stores or employment centers. Ask the planning and zoning department about what new projects are headed near your proposed location. Of course, the No. 1 driver is existing and proposed rooftops. A parcel near a lot of new homes or multi-family developments is always good.
The basic question is, do people want to live and work nearby? If the answer is yes, you probably have the growth vectors you need. With the pandemic, working from home has really changed the market dynamics. Just watch out for natural barriers to growth such as rivers or lakes, or topographical features that’ll limit directional vectors.
Sometimes, there are site attributes that seem great on the surface but are actually traps. You need to avoid these three.
1. The land is a “bargain.” Often, the reason an owner or developer chooses a site for self-storage is because the land is cheap, or he already owns it. The acquisition price of the land shouldn’t be only determining factor. It can be a factor, but not the factor. Be careful here. A low-cost or low-basis parcel may not have the qualities of a good self-storage site as outlined above. It may also have hidden problems.
2. There are lots of competitors, so it must be a good market. A second issue that traps some developers and owners is lack of respect for the level of competition in a market. Don’t be fooled into thinking you can simply take tenants from other self-storage operators. It may take many years of growth and financial suffering before stabilization occurs. Move on from hyper-competitive markets. Don’t go down this rabbit hole.
3. Local occupancies are high. Be careful in a market where “everybody is full.” High occupancy doesn’t always mean positive financial results. Always check the local rental rates!
Self-storage site selection is a relatively straightforward process. The big takeaway is you don’t need all the above factors to have a successful self-storage project, but the more you have, the better off you’ll be. After you identify and acquire your parcel, you can be relatively confident in the upward trajectory of your business.
Jeff Turnbull is the broker in charge at Turnbull Commercial, with more than 25 years of experience in developing and operating self-storage properties in the Charlotte, N.C., area. He’s a licensed attorney in the state and holds a real estate broker license in the both the Carolinas. Jeff recently sold his self-storage properties and now offers consulting and development services. He’s a regular contributor to Inside Self-Storage and a speaker at various industry events. To reach him, e-mail [email protected].