In every industry there are myths, Self-Storage is no different. Today let's delve into some of the prevailing myths about our industry, to take a look at which ones are Fact and which ones are Fiction. Here are my top 10 Self-Storage Myths:
Myth 1- A Self-Storage Facilities location doesn’t affect your income.
False- Self-storage growth is booming, but many overlook the critical importance of location for success. Facilities near residential areas, apartments, military bases, or colleges consistently outperform others. Accessibility and visibility play vital roles in customer choice and occupancy rates. The adage "location, location, location" remains as true as ever, especially in self-storage.
Myth 2- Self Storage is easy to acquire and inexpensive.
False- Modern self-storage demands investments in security, safety, convenience, quality service, and competitive pricing. Yet, navigating today's high land costs adds complexity to developing new facilities. With land costs reaching unprecedented levels and development expenses escalating due to inflation and rising material prices, the financial investment is significant. Meeting quality standards, such as advanced technology, paved facilities, climate control, electronic access, and robust security measures, further adds value. Despite these challenges, the self-storage industry continues to thrive, offering valuable storage solutions to meet evolving customer needs.
Myth 3- Self-storage operations have lower costs compared to other real estate investments.
True- Typically, the operational expenses for a storage facility, encompassing taxes, utilities, and management/franchise fees, are notably lower, relative to its size. Moreover, storage facilities entail lower labor intensity and exhibit minimal staff turnover, thereby mitigating training and personnel costs for the facility owner.
Myth 4- The abundance of units in self-storage facilities minimizes turnover disruptions compared to other real estate investments.
True- In a self-storage facility with 500-600 units, when 10-20 customers vacate, it scarcely affects the overall rent or square footage, resulting in almost unnoticed lost revenue. Conversely, within similarly sized apartment complexes, shopping centers, or office buildings, the departure of several tenants may lead to significant vacancies and higher lost revenues, which are must more difficult to recoup than in self-storage facilities.
Myth 5- Owning land makes building a Self-Storage Facility cheaper.
False- Merely owning land doesn't assure success. In areas with low demand, a prolonged leasing period can lead to financial losses and, in extreme cases, bankruptcy. While rare, it's essential to recognize missed opportunities. Selling the land for alternative uses and investing in a self-storage facility where demand is higher may offer better prospects.
Myth 6- Constructing a multi-level self-storage facility on a small parcel of land is often more cost-effective than building a single-story facility on several acres.
False- Today, there's a common misconception regarding the cost-effectiveness of building a multi-level self-storage facility on a small parcel of land, especially considering the current climate of higher land costs. While purchasing a smaller parcel of land may be more affordable and easier to find in some cases, the additional expenses for development, including elevators, construction materials, and overall build cost, can significantly increase the cost per square foot of the facility. Additionally, building in phases is often not feasible, leading to a larger upfront investment without immediate revenue and potentially prolonging the time to achieve significant profits. While building on smaller parcels may seem appealing, it typically results in a more costly endeavor compared to taking the time to find the right parcel of land.
Myth 7- Optimizing the unit mix when constructing a self-storage facility can drive higher profits.
True- The inclination to prioritize larger units over optimizing the unit mix is common among first-time self-storage investors. While larger units may initially rent faster, they often command lower rates per square foot, diminishing the facility's overall economic occupancy and profitability. It's essential to consult with an experienced self-storage professional to establish an ideal unit mix. A meticulously planned unit mix can significantly enhance revenue potential, translating into substantial financial gains for the facility.
Myth 8- It is unnecessary to focus on aesthetics and customer comforts when constructing a self-storage facility.
False- Interestingly, women are utilizing self-storage facilities during moves at a significantly higher rate than men, with a 41% to 33% disparity. While both genders value a clean, dry, and secure environment, studies suggest that women prioritize aesthetics nearly 90% of the time, placing greater emphasis on the facility's visual appeal over convenience and pricing. Today's customers seek a storage facility that not only offers state-of-the-art security and technology but also boasts a well-maintained, aesthetically pleasing environment with attentive staff. By incorporating additional comforts such as beverages, snacks, and ambient music, a facility can become the preferred choice for customers, even if its rental rates exceed the market average. It's essential to recognize that people are willing to pay for comfort, quality, and a positive experience, all of which define a premier storage operator.
Myth 9- Any reputable general contractor, architect, or engineering firm possesses the capability to develop and execute a plan for constructing a premier self-storage facility.
False- While many general contractors, architects, and engineering firms possess the basics required for building a self-storage facility, creating a top-of-the-line premier self-storage facility demands extensive experience and expertise. The intricacies involved in developing such a facility require years of trial and error, accumulated knowledge, and the collaborative efforts of seasoned professionals in the self-storage industry. Without this level of expertise, you may find that the final facility falls short of your expectations in terms of quality. While there are undoubtedly many reputable firms and contractors available, it is advisable to collaborate with those who possess specific experience and understanding of the self-storage sector.
Myth 10- Owners of premier self-storage facilities are highly satisfied with their investments and typically enjoy excellent income returns.
True- For many owners who have ventured into developing and operating their own self-storage facilities, the experience brings immense happiness and fulfillment. They have the opportunity to become integral members of their community, providing top-notch service to customers while building generational wealth. In addition to generating significant yearly income, these facilities often serve as appreciating real estate assets, further contributing to the owner's wealth over time. A well-operated and maintained storage facility is a source of pride for most owners and typically requires minimal personal time investment for management. Overall, despite the initial work involved in developing a premier self-storage facility, most owners find themselves among the happiest investors in the world.
Written by Kevin Harless- Kevin is development director at Storage Authority and has spent the last 15 years of his career in Self-Storage and construction. Contact Kevin for information about more information at keven@storageauthority.com.