By Ed Clement
"Your Self Storage Planning - Site Selection - Design-Build" by Marc Goodin
Chapter 8
1. Location, Location, Location. This is the single most crucial factor in the success of a self-storage business. Often half or more of your rentals will come from drive-by traffic. Out-of-the-way locations typically struggle to get customers compared to main street locations. The best properties are on a main road with an average daily traffic volume of at least 10,000 vehicles per day with a preferred average daily traffic volume of 20,000 vehicles per day or greater. These are often state roads. Of course, due consideration must be given to the surrounding population and how much of the potential renters should be proportioned to existing or other planned self-storage facilities nearby. Often, you can get roadway traffic counts from The Department of Transportation. Think retail. Would you put retail development on a back road or behind another development? No. And the same goes for new self-storage developments.
2. Unmet self-storage demand is just as important as location! For a quick first total demand review, you can use 8 square feet of self-storage demand per person, in a 3-mile radius as equilibrium. To get the unmet demand the square footage of the existing and planned self-storage facilities in the 3-mile radius will need to be deducted from the estimated needed sq. ft, which is based on the total demand needed for the existing population. For rural areas with little competition, you may draw from a larger area. For large metropolitan areas with high populations, the demand area may be smaller. Higher population density is often better because it is easier to have better service and out-market the competition and get more of your share of renters than to find renters that do not exist. Too many people tell me they are about to build self-storage on land they own or located because self-storage is needed in the area. They are right about half the time, which is not a good enough percentage to move forward with a multi-million-dollar investment. In the end, new developers should make the final decision based on a professional feasibility study and their review. But you can rule out some properties with a bit of effort and determine which property in an area would be the best one to choose to pay for a feasibility study. First, you need to determine the existing population. The population can be provided by many realtors and is often provided with many property listings. There are also several online programs that can provide population and demographics.
The unknown is the demand of a square foot of self-storage per person. There is not a one-size-fits-all, demand per person, for all locations since demand can and does vary from state to state and even area to area within the same state. Demand in the end is not a square foot per person but rather a square foot/person where facilities reach equilibrium (90% -+ full) at acceptable rates. In other words, demand cannot be determined in a vacuum and must be used in conjunction with a review of the existing market occupancy rates and existing rental rates. Be careful not to assume full means there is a need for more facilities. Full with a regular 10 x 10-unit renting for $70 is not a good sign while 10 x 10’ renting for $160 is a great sign.
For many urban areas where there are numerous self-storage facilities to choose from the draw/competition area of a 3-mile radius is commonly used. And the demand of 8+_ sq. ft per person can be used as a temporary starting point. So, if the 3-mile population is 30,000, the total self-storage demand would be: 30,000 people x 8 sq. ft/person = 240,000 sq. ft of self-storage needed.
Next, you need to determine the location, number, and size of the existing self-storage in the 3-mile radius. Most novices underestimate the number of nearby facilities. You can use google earth pro or “google nearby” to help you find the 3-mile facilities. On google earth pro you can draw a 3-mile radius and visual search for the self-storages. For a given address on a google map, you can enter self-storage in the nearby tab, and it will show the nearby self-storages. But it does not always go over town lines, so it is tricky to get all the facilities. This is considerable work to make sure you get it right but can often give you a quick count. You may be able to get the existing square footage from the land records or scale from google earth pro, which can be, again, a lot of work. Or you could use a real rough estimate of 50,000 sq. ft of self-storage for each facility with a square footage check as part two of your demand study.
If you had 3 existing self-storages in the three-mile radius you could temporarily assume that: 3 facilities x 50,000 sq. ft/each = 150,000 sq. ft of the existing demand has been met.
The needed demand for this case would be:
The total demand of 240,000 sq. ft – 150,000 sq. ft existing = + 90,000 sq. ft demand needed.
You would also need to subtract the demand for any facilities under construction or in the approval process. Read more about how you can prepare your own Mini Demand Plus Review on the Storage Authority blog: https://www.storageauthorityfranchise.com/post/two-hour-mini-demand-plus-review
The good news is there are apps/websites that can quickly determine the population, provide the existing self-storage in the area, and the square footage of the existing facilities. Therefore, the existing and unmet self-storage demand can be determined quickly as part of a preliminary study. An important thing to keep in mind when using these websites is they each have their advantages and disadvantages, and none are 100% correct.
For example, none guarantee they have all of the facilities in their database, and some have self-storage that are never going to be built or may even count boat/RV storage as self-storage. Each program has its own way of calculating the net rentable square footage and some will not provide that information, knowing the actual amount may be substantially different. In addition, most programs do not have all of the US facilities in their program. Some are not accurate in rural areas because they concentrate more on metropolitan areas. If you are missing just one existing facility it may drastically skew the results. Experts often cross-check from one program to another, use google for another initial check, and then, of course, do a field check and talk to the town for the final study. One developer who recently contacted me did his own demand calculations. When I emailed him back our review of his findings with an online demand review, he said, “Wow what you did in 2 hours took me over 2 days to do by hand.”
Of course, Storage Authority® will help you find and review your potential sites, saving you mega hours. Better yet, we will even help you determine the best areas to look for land in your neighborhood and how to find land offline.
The occupancy of the existing facilities (and their rates) can tell you a good deal about the local market demand. You should visit and call a few different locations in order to get their rates. While talking with them, ask about their occupancy, before you even start looking for land.
In the end, there are many important factors in addition to demand, so a feasibility study is highly recommended. For planning purposes, each can cost $6,000 to $10,000. If you need preliminary assistance with your initial investigations or need a recommendation for a feasibility expert email me at marc@StorageAuthority.com and I would be happy to help.
3. Dry, flat, usable land with no restrictions can typically support 10,000 to 15,000 square feet of one-story self-storage buildings per acre. I recommend you use 10,000 sq. ft per acre before you have done your due diligence. I have not found many parcels without restrictions of one kind or another, so it is prudent to do significant due diligence to determine if a parcel of land is suitable for your needs and to determine a fair purchase price for the land.
The shape of the land, topography, wetlands, drainage, flood limits, neighbors, building design, and zoning requirements can have a significant impact on the final building square footage. Some towns, for example, only permit 50% impervious lot coverage for the buildings and pavement. Other towns do not permit a new self-storage within 3 miles of an existing facility. Regulated wetland setbacks or wetland buffers often vary from 50 feet to 150 feet from the wetlands. On-site storm drainage detention, if required, can require a half-acre or more land. High parking requirements in some towns can also limit the number of buildings. In other words, regulations can significantly reduce the amount of self-storage permitted on a given parcel. Often, self-storage is not even permitted in residential zones and other zones.
4. Typically, you will be looking for a five-acre or larger parcel of land, with few constraints or unusual zoning restrictions, for a 50,000 sq. ft one-story facility. I recommend an extra acre or two for future expansion. Don’t overlook the importance of walking the entire property before you make an offer. Water, wetlands, watercourses, steep slopes, easements (overhead wires), and abutting uses can sometimes be observed on a site walk. If you have a civil engineer you are working with, ask him to walk the site with you. It will be well worth his fee, especially if you do not have experience with land development.
5. Many self-storage building manufacturers will provide a conceptual layout plan. This is a good preliminary start but remember they do not always take into consideration all the land feature restrictions or zoning restrictions.
6. Early on in the due diligence process you should have the wetlands delineated on the site. Of special concern are vernal pools and special breeding areas that often require very large buffer areas. Endangered or threatened species should also be reviewed early on.
7. Consider the limitations and cost of steep sloping land before making an offer. Because single-story buildings are often long and are only 24 to 30 feet apart, they require a relatively flat finish grade. Buildings can be stepped down, but this can only be done so much, and it also adds to the cost. Filling or excavation on steep slopes can cost tens of thousands of dollars, sometimes a lot more.
8. Once you find a parcel that appears to meet your qualifications, I highly recommend you have a local engineer do a conceptual plan for you. Ask them specifically about all the utilities including water, sewer, drainage, and stormwater detention. Make sure they tell you about any zoning regulations that may be of concern. Easy access and street views are two important items to attract more renters. If you don’t have city sewer, you will need extra land for a septic system. If you do not have city water, you will have to dig a well and build the required firewalls, which will add substantially to the project cost.
9. Remember to review the local design and approval process in detail before determining the purchase option time frame. And don’t forget bidding and banking takes a couple of months after the building is designed. I recommend at least an 8-month period to get your approvals. I also recommend that you include a 6-month extension clause, even if you have to pay to execute an extension. To get the extension clause approved by the landowner, you might have to submit a site plan application to the town by a certain date in order to show you are moving swiftly forward with the project.
10. The best sites are not always on the multiple listing services and do not always have a for sale sign on them. We are having great success finding offline parcels. Fallen down signs, a friend of a friend, word of mouth, or land record research have led to great parcels. I knocked on doors. I called landowners and told them I was interested in buying their land and asked if we could meet. When they ask the price, you are willing to pay, ask if you can walk the property to help you determine the price. It often takes two or three meetings of no’s in order to get to the yes. In three recent cases of buying land offline I have been involved in, no one had to pay a realtor’s fee. And even better, they were purchased below market rates.
For a free copy of Marc's book, "Your Self Storage Planning - Site Selection - Design-Build"
Email me at ed@storageauthority.com
Ed Clement is a franchise director at Storage Authority. One of his passions and responsibilities is helping franchisees find land by sharing how to find land both online and offline. Ed has a strong background in real estate, investment banking, and management consulting. He is available at Ed@StorageAuthority.com or 727 946 0745 to answer your questions and share the Storage Authority Franchise opportunity and advantages with you.