Analyzing Market Demand for Self-Storage Development: A Guide to Site Selection

By Garret Byrd

Storage Authority Franchise

The self-storage industry continues to thrive, driven by urbanization, lifestyle changes, and economic factors. However, the success of a new self-storage facility hinges on selecting the right location with a robust customer base. A critical step in this process is conducting a market demand analysis within a 3-5 mile radius of potential development sites. By evaluating key demographic factors—population density, household income, and job growth trends—developers can make informed decisions to maximize occupancy and profitability. This article explores how to analyze these factors and ensure a sufficient customer base for a self-storage facility.

Why the 3-5 Mile Radius Matters

The 3-5 mile radius is a standard trade area for self-storage facilities, particularly in suburban and urban settings. In densely populated urban areas, such as Manhattan, the radius may shrink to 1-3 miles due to high competition and accessibility, while rural areas may require a 5-10 mile radius to capture enough demand. The 3-5 mile range is typically ideal because it reflects the distance customers are willing to travel for storage solutions, balancing convenience with market coverage. Understanding the demographics within this radius provides insights into the potential demand and viability of a facility.

Key Demographic Factors to Analyze

To assess market demand, developers must evaluate three primary demographic factors: population density, household income, and job growth trends. These metrics help determine whether the area can support a self-storage facility and sustain long-term growth.

1. Population Density

Population density is a primary driver of self-storage demand, as it correlates with limited living space and the need for external storage solutions. High-density urban areas, such as the D.C or New Jersey, naturally create a pressing need for storage due to smaller living spaces. According to industry standards, a minimum population of 30,000 within a 3-5 mile radius is a good benchmark for a viable market.

To evaluate population density:

• Calculate Square Footage per Capita: Divide the total rentable storage square footage in the area by the population. The U.S. average is approximately 7-8 net square feet per person. Markets with less than 7 square feet per capita are considered undersupplied, indicating potential demand, while those above 8 square feet may be oversupplied, suggesting caution.

• Assess Renter vs. Homeowner Mix: Renters, who often live in smaller spaces and move frequently, are more likely to use self-storage. In 2023, the U.S. had 43.8 million renter households, up from 43.1 million in 2022, signaling growing demand in rental-heavy markets.

• Consider Population Growth: Areas with positive population growth, such as Frisco, TX (70% population increase over the last decade), indicate rising demand for storage as new residents settle in.

  
  

Example: In a 3-mile radius with a population of 30,000 and 143,000 square feet of existing storage, the square footage per capita is 4.77 (143,000 ÷ 30,000). Assuming an equilibrium of 8 square feet per person, the market could support an additional 97,000 square feet (30,000 × 8 - 143,000), suggesting strong demand for a new facility.

2. Household Income

Household income levels gauge a population’s ability to afford self-storage services and their likelihood of owning excess belongings that require storage. Higher median household incomes correlate with greater disposable income, which drives the purchase of recreational items (e.g., skis, golf equipment) and the willingness to pay for storage. According to industry insights, markets with median household incomes above the national average ($74,262 in 2023) are more likely to support self-storage facilities.

To analyze household income:

• Identify Median Income Levels: Use census data or industry tools like Radius+ to compare the median household income within the 3-5 mile radius to regional and national benchmarks. Areas with higher incomes are more likely to have a customer base with the financial capacity to rent storage units.

• Evaluate Spending Patterns: Wealthier households tend to accumulate more possessions, increasing storage needs. For example, 11.1% of U.S. households (14.6 million) rent storage units, with higher-income areas showing greater penetration.

• Consider Economic Stability: Stable or growing income levels indicate a reliable customer base. Markets with diverse employers and low unemployment rates are particularly attractive.

  
  

Example: In a market with a median household income of $90,000, residents are more likely to afford the national average cost of a 10x10 climate-controlled unit ($145.09 per month in 2023) and have excess items to store, driving demand.

3. Job Growth Trends

Job growth is a strong indicator of economic vitality and population mobility, both of which fuel self-storage demand. Areas with robust job creation attract new residents, increase household formation, and drive migration, all of which correlate with storage needs. For instance, markets like Austin, TX, with strong tech-driven job growth, have seen significant self-storage demand despite recent supply surges.

To assess job growth trends:

• Track Labor Force Flows and Nonfarm Payrolls: Industry research suggests that labor force flows and nonfarm payrolls are superior metrics for understanding self-storage demand, as they reflect job-related migration. For example, 68% of self-storage customers use facilities during residence changes, often tied to job relocations.

• Evaluate Employment Diversity: Markets with diverse industries (e.g., technology, healthcare, education) are more resilient and attract a mobile workforce. Proximity to universities, hospitals, or corporate hubs can further boost demand.

• Monitor Population In-Migration: Areas with positive in-migration, such as Myrtle Beach or Phoenix in 2024, are prime candidates for self-storage development due to new residents needing temporary storage during transitions.

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Example: In a 5-mile radius with a 2% annual job growth rate and a major university nearby, the influx of students, faculty, and professionals creates a dynamic customer base for both short-term and long-term storage needs.

Conducting a Mini Demand Study

A mini demand study is a practical way to analyze these demographic factors and assess market viability. Here’s a step-by-step guide:

1. Define the Trade Area: Use a 3-5 mile radius as the primary trade area, adjusting for urban (1-3 miles) or rural (5-10 miles) settings based on population density.

2. Gather Census Data: Collect data on population, renter vs. homeowner ratios, household income, and job growth from sources like the U.S. Census Bureau, local planning departments, or industry tools like Radius+.

3. Assess Existing Supply: Identify the number of self-storage facilities, total square footage, and occupancy rates within the radius. Industry data websites can provide this information, or you can conduct phone surveys and site visits.

4. Calculate Demand: Compare the existing square footage per capita to the equilibrium benchmark (8 square feet per person). Estimate the potential for additional storage by subtracting existing supply from the equilibrium need.

5. Evaluate Competition: Map competitors and assess their strengths (e.g., climate control, security features) and weaknesses (e.g., outdated facilities, poor management). Identify market gaps, such as demand for RV storage or contactless rentals.

6. Consider Additional Drivers: Proximity to colleges, airports, or highways can boost demand. Life events like downsizing, divorce, or death (the “four Ds”) and trends like e-commerce growth also drive storage needs.

   
   

Ensuring a Sufficient Customer Base

To ensure a sufficient customer base, developers must balance supply and demand while targeting the right demographic profile. Key considerations include:

• Undersupplied Markets: Focus on areas with less than 7 square feet of storage per capita, as these markets have untapped demand. For example, New Orleans has low projected development but signs of economic growth, suggesting potential for new facilities.

• High-Demand Demographics: Target areas with a high proportion of renters (over 30%), median household incomes above $75,000, and positive job growth (1% or higher annually). These demographics are more likely to rent storage units for moving, decluttering, or business purposes.

• Competitive Differentiation: Offer modern amenities like climate control, digital access, or vehicle storage to stand out in competitive markets. For instance, 42% of renters use storage during moves, and features like drive-up access can attract this segment.

• Monitor Market Trends: The self-storage industry is projected to grow at a CAGR of 5.9% globally from 2024 to 2030, driven by urbanization and e-commerce. However, oversupply in markets like Houston or Austin can depress rents, so prioritize areas with balanced supply growth.

Challenges and Considerations

While analyzing market demand, developers should be aware of potential challenges:

• Oversupply Risks: Markets with more than 8 square feet per capita may face declining rents and longer lease-up periods. For example, Austin’s storage surplus led to a 10.1% rent decline in the Southwest region in 2024.

• Economic Volatility: High interest rates and rising property costs can increase development expenses, impacting profitability. Securing favorable debt terms is crucial.

• Local Regulations: Some municipalities resist storage development due to low tax revenue or aesthetic concerns, so verify zoning and permitting requirements early.

• Data Limitations: Industry data tools provide a starting point but may not capture real-time market dynamics. Supplement with on-the-ground research, such as competitor visits and customer surveys.

Analyzing market demand within a 3-5 mile radius is a critical step in developing a successful self-storage facility. By evaluating population density, household income, and job growth trends, developers can identify underserved markets with a strong customer base. A mini demand study, supported by census data and industry tools, provides a clear picture of supply and demand dynamics, helping developers make data-driven decisions. As the self-storage industry continues to grow—projected to reach $83.20 billion globally by 2030—strategic site selection will be key to capitalizing on this booming market. By targeting high-density, high-income, and growing areas while addressing competitive and regulatory challenges, developers can position their facilities for long-term success.

Want to Learn More?

Storage Authority Franchising is all about owning your own local self-storage business, supported by professional systems and expertise. We like to say, "You're in business for yourself but not by yourself." If self-storage is on your mind, don't hesitate to reach out to me.

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