One of the challenges of developing a new self-storage facility is finding the right location. Ideally, the business should be highly visible, located on a busy road close to potential clients. A great price and regular parcel shape are helpful, and proper zoning is critical. In many markets, though, you’ll find the only available land is at the edge of town or in areas already saturated with existing storage facilities.
One way to overcome this is with a conversion project. Conversions provide the opportunity to put your business in established areas where demand exists but not vacant land. Local government may be more likely to grant building approvals if you’re redeveloping a vacant or blighted property, and you’ll have the advantage of starting with a structure where utilities are already present.
Another consideration is whether there’s enough space to be profitable. Most conversion facilities have a management office and manager, which means the site needs to be large enough and generate enough income to cover that employee’s salary. Alternatively, a satellite or unmanned location can be run from a kiosk or remote office, allowing you to develop a smaller facility. As you examine properties, look to see if there’s excess land where new storage buildings could be erected, or whether there are outlots that could sold.
Self-storage typically doesn’t require as much parking as other businesses, so if the property has a large parking lot, it may be possible to develop additional buildings in that area. Building height may also enable additional space. If the structure is 18 feet or higher on the interior, it’s ideal for two stories. By the way, 16 feet is the absolute minimum that can work, and only if you use swing doors on the units instead of roll-ups.
Income is easier to calculate. You can assume that about 80 percent of a single-story conversion will be rentable. Survey nearby facilities to determine local rates for climate-controlled units and generate an estimated revenue per square foot. You might discount during rent-up, but if you have a good location with an edge over nearby competitors, you’ll usually be able to charge premium rates.
Developers who are new to self-storage are often dismayed by the amount of money it takes to get started, even with a conversion. To get construction approvals, you’ll typically need to hire professionals to draw up your plans. This money will come from your pocket, as banks won’t give you a loan until you have plans approved by the city. You may also need a civil engineer to work out stormwater or traffic concerns, and you’ll typically need an architect to help with the building rehabilitation and any façade changes.
Formulate a relatively detailed plan before asking contractors for bids. By providing as much information as possible to suppliers and subcontractors, they’ll be able to provide more accurate bids with fewer surprises later. You’ll also stand a better chance of having true apples-to-apples comparisons on multiple bids if everyone is bidding from the same specs.
As you create financial projections, think first in terms of cost and revenue per square foot. As your plan takes shape, replace your rough estimates with solid numbers, backed by quotes from your subcontractors. Once these are in place, you can create a more detailed income projection based on the actual unit mix and rates. Keep in mind that changing your plans after financing is in place and construction has started will cause delays and run up expenses.
The construction requirements of a self-storage conversion will vary depending on the condition of the building and scope of the changes. Here are a few key items to examine.
Let’s start with the exterior. The roof is a major item that may need attention. Most projects will also require some revision to the loading/unloading area and entrances, which may require the installation of automatic doors and access control. New signs, paint and aesthetic improvements are typically part of the renovations. The site may also need new driveways or parking. Landscaping and exterior lighting may need to be addressed.
Inside the building, demolition is generally the first order of business. Removing unnecessary walls will open the space to prepare for self-storage. Pay attention to the floor. Stripping tiles, grinding away imperfections and filling holes can be a major undertaking. The remaining walls and ceilings are usually painted white for a clean start. This is best done before bringing in new materials.
If the HVAC system needs updating or replacement, this is also easiest to do while the building is empty. Adjustments to the lighting system should follow, which typically involves the installation of new, motion-activated banks of lights over the hallways. Most projects will also include installation or reconfiguration of sprinkler systems. Don’t assume the existing sprinklers are adequate, as self-storage may be considered a higher fuel load than the previous use. Other interior tasks will likely include remodeling restrooms and creating or renovating an office.
With other prep work and mechanicals out of the way, the project will finally be ready for the storage units. The unit mix for interior self-storage typically consists of smaller units than one used for traditional projects. While drive-up buildings may include large spaces for storing cars or boats, most conversion units are limited to items that can be carried through a hallway. If clients need more space than your biggest unit, they can rent multiples. Any large units you do have are often placed closest to the entrances or loading bays.
The process to create a conversion may sound simple, but there’s a significant amount of planning and work to carry it through to completion. But, with the reward of a beautiful new facility in a great location, it’s often a great investment.