Reprinted with permission from Storable.
Many factors go into figuring out whether a site is suitable for self-storage construction. Not every piece of land you come across will be right for a new development, so it’s best to make a careful, strategic decision based on data and insights you’re able to gather via research. Let’s examine the process and criteria you should scrutinize.
A key to self-storage site selection is conducting an analysis of the market you’re targeting. Not only will you find this exercise valuable, any lender you approach about financing will want to see your feasibility report, which should include:
- Demographics: Analyze the current population, population trends, household income, job growth and other statistics. The trade area for storage units typically covers a three- to five-mile radius, though it could be smaller or larger depending on population density.
- Availability of land: How much land are you able to buy or lease? Can it reasonably accommodate the square footage you have in mind? A single-story, drive-up self-storage facility will likely take up more real estate (up to 4 to 5 acres) than a multi-story project (perhaps 2 acres). Similarly, a site offering boat/RV storage will require more space. You’ll also want to consider how many parking spaces to allot for customers and employees.
- Competition: How many other self-storage operators are there nearby? If the area is saturated, search elsewhere. If there are too many existing facilities or new developments, your project could struggle to lease up without steeply discounting rates.
- Pricing: What are the rental rates at nearby facilities? If they’re significantly lower at one site than another just a mile away, shift your attention to the site that holds the promise of higher self-storage rents.
- Climate control: How many facilities in the area offer it? Climate-controlled units attract higher rent, and this can be a way to differentiate your new business from competition.
It’s wise to hire a self-storage consultant to conduct your feasibility study as well as tap a local industry broker to help you pick the best site. Though you can certainly go it alone, you’re better off entrusting those duties to the pros.
Lay of the Land
When mulling sites
- Is the site easily accessible by car? Prospective tenants aren’t eager to do business with a facility when the site is difficult to enter or exit.
- Is it visible from the street? Signage can be a valuable marketing tool, but only if passing drivers can easily see it. A big chunk of business comes from drive-by traffic, so make sure your building is visible.
- How much street traffic is there? Any one of these motorists is a potential tenant.
- How many homes and apartments are nearby? The folks who live in the homes and multi-family residences in the vicinity—particularly those who live in housing with little to no storage space—are prospective customers.
If you can find a site that’s already zoned for self-storage, you’re off to a great start; however, most parcels aren’t so blessed. If you pick a site that isn’t appropriately zoned, you may face months (if not years) of jumping through costly hoops to get the land rezoned for your project; and after all that effort, you could still wind up without approval!
It’s possible you might find rezoning to be relatively painless if local officials are favorable toward self-storage development, but success is never guaranteed. Depending on the municipality, you might also be able to gain approval for a special-use permit. (By the way, unless you’ve done your due diligence and you’re certain a self-storage facility would flourish, resist the temptation to build on land you already own!)
Weigh the requirements. You may think you’ve settled on the perfect self-storage development site only to realize you’ll have to sink thousands and thousands of dollars into preparation. For example, let’s say your target parcel contains an abandoned building that needs to be demolished. That’ll add to the overall project cost. If possible, choose land that requires minimum work before construction begins.
Put a spotlight on safety. Self-storage tenants like to feel their belongings are safe, so it’s important to consider whether the site is in an area with high or low crime. The former may drive away potential prospects. On the contrary, if the site is in a low-crime area and you install robust security, customers may find your new facility particularly enticing.
Calculate the cost of building. To make your self-storage facility as profitable as possible, avoid overpaying. Generally, the land cost should account for about 25% to 30% of the total project price tag. If you find a parcel that falls into that sweet spot, congratulations! If it goes too far beyond that range, hunt elsewhere, unless the projected rental rates can justify the extra cost.
Finding a suitable site for self-storage development is just the first step in a long process toward lease-up. Once you’ve finally identified your ideal spot, you’ll need to secure construction financing and start evaluating companies to begin the physical work on your project.
John Egan is a freelance writer and editor for Storable, a supplier of cloud-based access control as well as management software, marketing services, payment processing, website development and other services. He’s also a frequent contributor to the SpareFoot Storage Beat industry blog. Based in Austin, Texas, he loves pizza, University of Kansas basketball and puns. For more information, call 888.403.0665; email [email protected].