Self-storage is a real estate investment as well as a retail business. It’s all about developing an income stream using the most efficient method. Your project might be a new single- or multi-story structure, a building conversion, or a renovation of an existing property. Whatever the type, it’s essential to maximize revenue and yield the best return on investment (ROI).
Whether you’re building your first or 51st location, following are five areas on which to focus your attention. Sometimes it’s easy to become complacent after a string of successes, so even the seasoned owner/developer should heed the details and avoid these mistakes.
Mistake 1: Building in the Wrong Location
It all starts with the right location. Your land must have good visibility, access, traffic count, demographics, size, topography and shape. Just because the guy down the street is “full” doesn’t mean the area is ripe for development. You need to do a considerable amount of market research to find the right market.
Every self-storage owner wants to know how much land he needs and how much it’ll cost to develop. The answer is always the same: It depends. Inexpensive land can yield a poor rate of return depending on the anticipated revenue stream and construction costs. Here are a few scenarios to consider:
- Is the location in a densely populated, high-end retail area with little or no competition?
- Is it in a suburban or outlying area with plenty of room for growth, which often makes the land more affordable?
- Are there significant construction-related challenges that will drive up the cost?
- Is the location an infill site near a booming customer base but requiring a complex, multi-story design?
In short, each site has its own metrics, and it’s important to calculate the total ROI based on those figures. Your goal is to maximize that rate of return.
Mistake 2: Hiring an Engineer Who Lacks Industry Experience
Hire a quality engineering firm that has experience with self-storage design. It may cost you a little more, but your site will be more successful in the long run. A good firm can minimize construction costs by using proper techniques and not “over designing” the property. This includes the grading, storm-water retention, and building footprints and orientation.
Always try to minimize the earthwork involved and, thus, the grading costs. Use an efficient combination of catch basins and sheet flow to keep water controlled and moving away from door openings. In cold climates, buildings should be oriented north to south to allow for faster snow and ice removal on drive aisles (from solar warming).
There may be “hidden” development costs related to traffic such as the need for deceleration lanes or other unspecified road improvements. These are typically mandated by the local authorities responsible for permitting your project. An experienced engineering firm may be able to negotiate a reasonable compromise with the governing agency to help reduce the costs considerably.
Mistake 3: Failing to Maximize Building Functionality
A facility’s functionality is critical to its success. You need to consider the design of the management office, customer parking, keypad and gate access, building positioning, etc., and how well these elements serve customers.
A large, well-designed office with a nice reception area makes a good first impression with prospective tenants. It should include a large counter and a retail area for the display and sale of ancillary moving supplies. Sometimes several customers will visit the office at once. To accommodate multiple visits, make sure you have enough parking, counter space and seating.
The gate and keypad need to allow for straight-through vehicle access when possible. This helps keep tenants for damaging your equipment and buildings as well as their own vehicles. The drive aisles should be sufficiently wide to accommodate two-way traffic and allow for truck access. You’ll minimize the chance of building damage if there’s a well-planned traffic flow.
Finally, make it easy for tenants to access their units. Your design should minimize the distance from the parking lot to the unit, especially when it comes to climate-controlled hallways. The simpler your design, the better their self-storage experience will be and the more success your business will enjoy.
Mistake 4: Skimping on Curb Appeal
The facility should be physically appealing. Gone are the days of unpaved drives with rows of metal buildings and weathered doors surrounded by a chain-link fence. A modern, successful storage property has a retail storefront, excellent landscaping and beautiful signage. You might use more brick for the retail look, or perhaps more glass and metal in urban or industrial areas. Always try to make the store fit in with the local market. Good overall curb appeal will attract more prospects, lease up faster and a provide a better ROI.
Mistake 5: Growing Too Fast
Slow and steady is normally the best plan for a self-storage business. Don’t try to grow too fast. Make sure you’re adequately capitalized and operating at a healthy level in terms of occupancy and income before you start on an expansion or a new development.
Too often, an owner tries to expand or build a new store before the existing one has stabilized. He opens his first store to great initial success and dives in on location No. 2. However, the success of the first store will undoubtedly attract several new competitors. So, while developing the second site, the owner may start to feel the squeeze of competition on the first. If you grow at a measured pace, under a well-capitalized plan, you’ll achieve long-term success.
Final Thoughts
In summary:
- Don’t buy or develop a site just because the land is cheap or a competitor is fully occupied. Do your homework.
- Hire an engineering firm that has experience designing self-storage. It can save you a considerable amount of development time and money.
- Design your store with ease and functionality in mind. It’ll result in a better experience for customers and yield a greater return to you.
- Curb appeal is important. Use aesthetically pleasing architectural features, landscaping and signage to give your facility a competitive edge.
- Finally, don’t grow your storage business too fast.
Avoid these mistakes, and you’ll be an industry success.
Jeffrey Turnbull is president of Kodiak Property Management Corp. He’s been involved in the self-storage business as a developer, operator and owner for more than 20 years. He owns three stores in Charlotte, N.C., and is developing a fourth in the city. He’s also a licensed attorney in North Carolina, a licensed real estate broker in North and South Carolina, and a past president of the North Carolina Self Storage Association. To reach him, e-mail [email protected].
