Inside Self-Storage

JAN 2019

Inside Self-Storage (ISS) is an information source for industry owners, managers, developers and investors covering news, trends, facility operation, finance, real estate, construction, development, marketing, technology, insurance and legality.

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Page 41 of 47

What It Should Contain A thorough feasibility report should include: • Detailed project description • Review of the community and demographics, including the site's micro-market description • Self-storage trends that may affect the facility • An in-person review and analysis of competing facilities (often those within a three-mile radius) including square footage, age, location, unit sizes, street rates, features, occupancy rates, etc. (more on this later) • Review of any previously approved but not yet built projects and developments in the planning stages (must be included!) • An in-person review of the proposed site, including features such as street view, road-network traf- c, access, etc. • Analysis using national and local self-storage standards and a summary of these standards • Clear con- rmation that there is or isn't suf- cient demand to justify the proposed net rentable square feet • Projection of future self-storage development and how it may impact your facility • Total construction costs, including soft and hard expenses • Proposed unit mix (how many of each size), and proposed rental rates for each • Estimated operational costs broken down into typical self-storage expenses • Explanation of assumed - nancing, matching current lending standards and options available • Loan equity and required carrying costs based on lending option and pro forma analysis • Estimated lease-up rate and duration based on local conditions, including any required to meet the rent-up schedule • Month-by-month pro forma providing income, expenses and net operating income, typically provided for two full calendar years past optimal occupancy of 90 percent • Development, operational and marketing recommendations Rate and Competition Analysis As mentioned, the feasibility study should propose a unit mix with rental rates for each size based on local competition. The proposed rate won't necessarily reflect your marketing and sales expertise or how your property may differ from others. Typically, since your facility will be a new-generation site while many of your competitors are second-generation, the rates proposed in your study will be in the mid to upper range of the market. Since the facility that charges the most is typically the most profitable, closely review the competition and your proposed rates. The right product in the right location with the right management can often charge more (sometimes much more) than other storage facilities; but you can't determine if this is true for you without a thorough understanding of the market. A competition analysis should include the age and rates of individual locations, and the distance between your site and each competitor. It should evaluate each site's visibility, access, office quality, manager, traffic, property condition and curb appeal, and provide an overall rating for each site. It should note whether each facility has boat/RV parking, covered parking, gated access, paved or gravel drives, truck rental, 24-hour access, security cameras, door alarms, climate control, fire sprinklers, a retail office, etc. This data will help you understand why your state-of-the-art, next-generation facility should command premium rental rates. Project Particulars The more information you can provide your feasibility expert about your goals, plans, site and anticipated facility design, the more accurate the study will be. Valuable information includes the property address, assessor's parcel numbers, property area, property map and deed, land purchase price, traffic counts, zoning and approval process, land easements and restrictions, proposed net rentable square footage, number of stories to be built, unusual land features, out-of-the-ordinary construction costs, phasing plans, your background and a marketing summary. Share any information you have about self-storage expansions in the area or proposed facilities in the pipeline. The feasibility study will assume your facility will be attractive, with all the latest amenities renters want. It'll also assume construction by an experienced developer and operated by an experienced industry professional capable of executing a high-end sales and marketing plan. These are real factors that affect the success of a facility and shouldn't be taken lightly. Poor execution in development or operation will alter the report findings. Construction Costs Too often, I see construction costs based on past projects completed one to three years ago, without adjusting for increased costs or reflecting current soft costs. Review the cost ranges with your report provider. It's best to assume the high-end cost until you have bids in hand and added a 10 percent contingency. It's important to know that feasibility experts aren't typically engineers or architects, so they may not be able to evaluate how much self-storage can realistically fit on the property or the viability of getting regulatory approvals. If your civil engineer can provide a conceptual plan prior to the study, with square footage, based on local zoning and other regulations, it'll allow the report's findings to be more specific to your final development. The conceptual plan and input on regulatory approval should be considered as part of overall project feasibility. These are especially valuable for small lots that require a multi-story building. Be aware, though, that while some architects offer feasibility studies that include a zoning review and concept plan, your lender may not accept it for consideration if it requires a report from an independent, third party. Marc Goodin is president of Storage Authority LLC and the owner of three self-storage facilities that he personally designed, built and manages. He's been helping others in the industry for more than 25 years. To reach him, call 860.830.6764, e-mail, visit You can also purchase his books on facility development and marketing in the Inside Self-Storage Store. LEARN MORE Learn more from author Marc Goodin in the books "Crush Your Competition: 101 Self-Storage Marketing Tips" and "Your Self-Storage: Planning, Site Selection, Design, Build," available at You can also join Marc at the upcoming ISS World Expo in Las Vegas, where he'll lead a panel titled "Using Data-Driven Technology to Make Self-Storage Investing Decisions." Learn more at 40 ISS I January 2019

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