Is My area saturated with to much self storage?
By Marc Goodin
A common concern/question for new self-storage development is whether the area is saturated or not. Especially when you have several storage facilities in an area and see a new one under construction. Chances are that anybody building a facility now has probably done their homework before spending $5mm or more.
Typically, the new owner would have had a feasibility study done before undertaking such a major project. And a feasibility study is often needed for bank loan approval. So, the real question is, is there room for you to build one more? It takes so much math, plus what I like to call emotional math to get the real answer.
Here are 3 quick ways to use math to determine if a particular market is saturated:
1) What is the square footage of self-storage in the three-mile radius compared to the national average of 8 sf/person and the average sf/person in your state? If you are under the averages after your facility is built, this is a positive sign.
2) What is the average rental rate in the 3-mile radius compared to your state’s average rental rate? Again, if the rent in the 3-mile radius is higher, that is a good sign. Typically, if the effective rental rate is under $1.60/sf, the market rates will not afford new construction. Note the effective rate is not the teaser website move-in rate, which is often raised in 3 months and doubled in 9 months.
It should be noted if you are buying a facility, the rental rates are not as critical because you are paying based upon the existing profitability of the facility
3) What is the occupancy in the 3-mile radius? If it is less than 80%, often there is not a strong demand for new self-storage. Areas with excessive discounts are often a sign of low occupancy.
Not only do you have to look at all three of these items together; you must read between the lines. Maybe occupancy is low because one or two facilities have only been opened for a short time. Maybe some of the 3-mile competitors are so under-managed or off the beaten path they should not be considered competition.
Here is a link to learn about the emotional self storage math: Emotional Math
An industry analysis or feasibility study should be done early on to save time that would be better off spent looking for the next site to review. This can be done by hiring a feasibility consultant. We recommend utilizing a few tools available on the market, such as StorTrack, www.stortrack.com and Google, that provide data for you to do your own preliminary study.
If you would like to be on a fast track to owning a self-storage business, check out www.StorageAuthorityFranchise.com. Storage Authority Franchising is all about owning your own self-storage business, supported by professional systems and one-on-one expert guidance from the self-storage trenches. We like to say, "You're in business for yourself but not by yourself."
You don’t need to have everything figured out before we talk—that’s what an introductory conversation is for.
Are you looking to get started soon, or are you exploring possibilities for the future? Reply to this email and let me know, and we can arrange a time to connect.
Marc Goodin | 860-830-6764 | Marc@storageauthority.com | www.StorageAuthorityFranchise.com
Cheers,
Marc
As CEO of Storage Authority Franchising, Marc Goodin shares his passion, expertise, and unconventional wisdom with busy professionals to help them develop their own self-storage while they continue their careers. He owns 3 self-storage facilities that he designed, built, and manages.
Marc can be reached at marc@StorageAuthority.com or directly at 860-830-6764 to answer your franchising, development, marketing, sales, and operations questions. His best-selling self-storage books are available at Amazon.
Marc Goodin
860-860-6764
Your success story begins with Storage Authority!
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