Inside Self-Storage

JUN 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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The preferred Vertical Pivot gate in the Storage industry! Visit us at ISS World Expo, Booth # 1106 the market is underdeveloped doesn't mean you should build. Alternatively, just because it shows the market as overdeveloped doesn't mean you shouldn't. Occupancy and rental rates are far more important factors. For example, I recently worked on a market study in which the demand analysis indicated a square feet per capita above 74! But the competitors were all full, with waiting lists, and the rental rates were high—clearer indications of an underserved market than what the demand analysis would show. Location A good location is still important for a successful self-storage operation. Most customers choose a facility because they saw it on their regular traffic routes. Here are some important aspects to site selection: • Access: Customers don't want to make too many U-turns or drive around the block to get to your facility. Make sure you understand how easy (or diffcult) it is to access your site. • Visibility: Potential customers must be able to see you! Visibility can be garnered by having frontage on the access road or a multi-story facility set back from the street. • Traffc count: A facility can suffer from too little or too much traffc. You don't want your site on a dead-end road, nor do you want it or the busiest retail street in town where your facility and signage will be lost in all the "noise." • Lot size: It's vitally important to understand how much space you can ft on your lot. Coverage issues, Federal Acquisition Regulation requirements, height restrictions and the like can cause a good deal of havoc if you try to ft a square peg in a round hole. Never assume you can use all the acreage. Determine the buildable amount of space before buying the land. • Facility height: It's important to determine early in your process whether you plan to build single- or multi-story, as this will affect viable locations. Financial Considerations At the end of the day, determining whether a self-storage project is financially viable is the most important consideration. You must understand the potential return on your investment. What's your goal? Knowing that number and how to calculate it will help you make better decisions. First, gather all development costs to determine your budget. Often, the budget is missing critical numbers such as an operating deficit. Projects that looked viable at first no longer do once you calculate that number. Understand the equity requirements, interest rate and terms for your construction loan before moving forward. While there are fairly generous financing options available for new development, not all projects or borrowers are eligible for them. While I've noted the most critical aspects of determining project viability, there are other considerations you must contemplate as plans come together. Don't move too far along the process without first ordering a market and feasibility study from an independent consultant who has no financial interest in your project. Most banks and other financial institutions require such a study; but even if yours doesn't, there's too much at stake to not have a disinterested third party look at your project. Is it possible the study will come back negative? Yes … And that's just exactly what you need to hear before making a bad investment! Bob Copper is the owner of Self Storage 101, a consulting firm specializing in self-storage. Bob and his team have worked with hundreds of owners, operators and managers to maximize asset value, conducting countless due-diligence audits and helping owners position their facilities to sell. To reach him, call 866.269.1311; e-mail bob@selfstorage101.com; visit www.selfstorage101.com. LEARN MORE Learn more from author Bob Copper in the videos "Entering the Self-Storage Market: Should You Buy an Existing Facility or Build One?" and "Landmine-Aversion Therapy: How to Avoid Detonating Your Self-Storage Dream," available in on-demand and DVD formats exclusively at iss-store.com. Also are available by Bob are a video-based "Owner/Operator Executive Summit" and several books. Browse now! June 2019 I ISS 19

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