Many factors go into figuring out whether a site is suitable for self-storage construction, and not every piece of land you come across will be right for a self-storage facility.
So, how do you choose a self-storage construction site?
Very carefully, of course. But more to the point, choose it based on the data and insights that you gather.
Perform a market analysis
A key to selecting a self-storage construction site is conducting an analysis of the market you’re targeting. Not only will you find this market analysis (or feasibility study) valuable, but any lender you’re approaching about financing for your facility will want to see your market analysis. The analysis should include:
- Demographics. Analyze the current population, population trends, household income, job growth and other statistics about the area where you’re thinking about building the facility. The trade area for storage units typically covers a three- to five-mile radius, but the radius could be smaller or larger depending on population density.
- Availability of land. How much land are you able to buy or lease where you plan to build the facility? Can that land reasonably accommodate the square footage you have in mind? Obviously, a single-story drive-up facility may take up more real estate (maybe 4 to 5 acres) than a four-story facility (perhaps 2 acres), and a facility offering RV storage will require more space than a standard facility. You’ll also want to consider how many parking spaces to allot for customers and employees.
- Competition. How many competitors are there nearby? If the area around a site is too saturated with self-storage facilities, search elsewhere. If there are too many new self-storage developments in the area, your facility could struggle to gain occupancy without steeply discounting rents.
- Pricing. What are the rental rates at facilities near the sites that you’re looking at? If the rental rates are significantly lower at one site than another just one mile away, shift your attention to the site that holds the promise of higher rental rates.
- Climate control. Perhaps there are other storage facilities in the area, but how many have climate control? Climate control attracts higher rents, and can be one way you can differentiate your new business from existing facilities in your area.
It’s wise to hire a self-storage consultant to undertake the self-storage feasibility study and to tap a local self-storage broker to help pick the best site. While you could go it alone, you’re better off entrusting those duties to the pros.
Get the lay of the land
When you’re mulling sites for building a self-storage facility, also consider where the property is situated.
Ponder these questions:
- Is the site easily accessible by car? Prospective tenants aren’t eager to do business with a facility whose site is difficult to enter or exit.
- Is it visible from the street? Signage on your facility can be a valuable marketing tool, but only if people driving by can easily spot the signage and the facility. A big chunk of a facility’s business comes from drive-by traffic.
- How much street traffic goes by the site on a daily basis? Any one of those motorists is a potential tenant.
- How many homes and apartments are near the site? The folks who live in those homes and apartments — particularly those who live in housing with little to no storage space — are prospective customers.
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Examine the zoning
Some commercial real estate sites you’re considering may not be zoned for self-storage. So, if you pick one of those sites, 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 wind up with a nice parcel but without appropriate zoning.
If you can find a site that’s already zoned for self-storage, then you’re off to a great start. However, most sites aren’t already blessed with self-storage zoning. Yet if zoning officials where the site is located are self-storage-friendly, you might find rezoning to be relatively painless.
By the way, you should resist the temptation to build a self-storage facility on land you already own unless you’ve done your due diligence and you’re certain a self-storage facility would flourish there.
Weigh the development requirements
You may think you’ve settled on the perfect site but then realize you’ll have to sink thousands and thousands of dollars into site preparation.
For instance, an abandoned building sits on a site. The structure might need to be demolished to make way for your facility, which will add to the overall construction cost of the project. If possible, choose a site that demands a minimum amount of work before construction begins.
Put a spotlight on safety
Tenants of storage units like to feel that their belongings are safe at a self-storage facility. As such, it’s important to consider whether the site is in a high-crime or low-crime area. If it’s in a high-crime area, that might drive potential tenants away. But if it’s in a low-crime area (and you install robust security equipment), prospective customers might flock to your new self-storage business.
Calculate the cost of building a self-storage facility
In order to make your mini-storage building as profitable as possible, you should avoid overpaying for the land. Generally, the land costs should account for about 25% to 30% of the price tag for the entire project.
If you find land that falls into that sweet spot, congratulations! But if the price of the land goes too far beyond that range, hunt elsewhere for prime property, unless the projected rental rates can justify the extra cost.
Start building
You’ve finally found your ideal spot for a self-storage facility. Next you’ll need to secure construction financing and start evaluating self storage construction companies to start work on your self-storage project.
