Before you purchase a piece of land for the purpose of building a storage facility, you must conduct a feasibility study. To not do so would be foolish. This holds true no matter how much experience you have in the storage field--or any other field, for that matter. Each project should be evaluated individually. Not every location makes sense for the construction of a storage facility.
Now the question is: Will you conduct the study yourself or hire a professional? If you choose to do it yourself (which I don't recommend), you must understand feasibility is an art and a science. The so-called experts who simply produce volumes of charts and Excel spreadsheets without looking at the marketing aspects of a project miss the "art" portion of the feasibility equation. Regardless of whom you hire, there are some basic efforts you can make on your own.
Your Market Area and Demographics
The first you thing you need to do is get a map of your area. Take out a compass and draw a circle that extends in a 5-mile radius from your proposed location. In a highly rural location, you may want to go as far as 15 miles. On the map, mark the locations of all existing self-storage facilities in the area.
Next, get a company to create a demographic report for you. There are a variety of firms that do this (they are probably advertising in this issue). Get quotes from a few companies, then choose the best. All the company needs is your location and it will produce demographic figures for your 5-mile radius. Don't ask for the fancy, expensive study. All you'll need are the basic numbers, so just get the "basic" report.
Many storage-feasibility experts feel certain demographics indicate a greater need for storage than others. I've heard the argument that a lower socioeconomic area holds more potential for storage owners because lower-income populations generally live in smaller apartments and houses and, therefore, need more storage. On the other hand, people who are more affluent are more apt to buy "toys" and other items that cause them to need storage as well.
I don't think demographics are a real issue. I've seen highly desirable projects in all different demographic areas. Don't give demographics too much weight in your decision regarding a potential site. I bring it up so you won't get fooled by those who might mislead you as to their importance.
Evaluate the Competition
Strong competition makes it more difficult to be successful in a given area. And, of course, the reverse is true. To make an informed decision, you've got to evaluate your competition.
You'll need to visit each of your potential competitors. When you visit, evaluate them quantitatively and qualitatively. Your quantitative analysis will involve assessing the percent occupancy at each facility. You may be able to do this by counting locks, but keep in mind some facilities keep locks even on their vacant units. If you find the majority of the facilities are operating at 90 percent or higher capacity, you can give yourself a thumbs up in this area of your analysis. If you find many of them are completely full (which is foolish), you can give this location a very strong thumbs up.
Call and visit each facility as if you are a customer. Ask yourself whether you would rent from that particular location based on the quality of the manager. If you find managers who are less than competent, give yourself another positive mark. It's much easier to compete and win if the majority of your competitors are less than professional in their approach to the business. Keep a notebook with comments on each facility you visit. If you want to be really diligent, take a picture of each one as well.
Saturation Levels
Your next step is to determine the amount of storage space available in your area. I call this the saturation level. If a given area has 100,000 people and 500,000 square feet of storage space available, you've got 5 square feet of storage per person available in the market. This number varies dramatically around the country, from less than 1 square foot per person in the New York City area to around 10 square feet per person in Las Vegas and a few other cities.
If your saturation level is lower than other surrounding markets in your area, give yourself a thumbs up. There is no absolute number--it boils down to how your number compares to that of other market areas in your region or city. If your number is lower, it's an indication that more storage may be needed.
Degree of Transience of the Population
The more transient the population in a given area, the greater the need for self- storage. A stable area like many upstate New York communities will have less of a need for storage than a place like Phoenix.
What numbers do you use to make this assessment? This is where the "art" of feasibility comes in. I generally make this assessment based on a gut feeling, but you could probably compute the number of people who move in and out of an area and compare it to the national average. Give yourself a thumbs up if you are in what would be considered a more transient area.
Potential Renters
Who is in your area? Are there plenty of apartments and housing developments? Is there new building going on? Is there mainly residential building around you, or is it primarily commercial?
Although commercial clients can be very profitable, they are tougher to market. Give yourself another thumbs up if there is plenty of residential building in your 5-mile radius. This would include both new and existing residential properties.
Marketing Willingness
If you're the kind of person who wants to have someone else do your marketing, give yourself a thumbs down. Owners cannot abdicate the marketing responsibilities for a facility. I've heard plenty of owners complain that a management company or manager isn't doing the marketing as well as he should. Surprise! The owner has to be the one who champions this effort.
By all means, do everything described above. If you got a thumbs-up result in every area, you're probably in pretty good shape. This will help you better understand the work you ask a paid professional to do. The feasibility consultant you do hire must have a marketing perspective. Without a marketing background, you'll leave out the art in this process. The numbers do not tell the whole story.
When it comes to feasibility, it's better to make an investment of a few thousand dollars than a million-dollar mistake. Even if you've determined your land makes sense for self-storage, it is always a good idea to get a second opinion--but it should be an opinion from a knowledgeable expert.
Fred Gleeck is a self-storage profit- maximization consultant who helps owners/operators during all phases of the business, from feasibility studies to creating an ongoing marketing plan. Mr. Gleeck is the author of Secrets of Self Storage Marketing Success--Revealed! as well as the producer of the only professional training videos on self-storage marketing. To receive a copy of his Seven-Day Self-Storage Marketing Course and storage marketing tips, send an e-mail to [email protected]. For more information, call 800.FGLEECK; e-mail [email protected].