Ask Scott- Building From the Ground Up?

Has anyone you built storage units from ground up? I bought a property this spring that came with an extra lot, it’s all zoned commercial, so I have been thinking about building storage units on it. I am wondering if it is profitable to build brand new buildings or not?

The answer is almost always “it depends”.  Self Storage, as a general rule, is quite lucrative & profitable.  However, that doesn’t mean that you can have a “build it and they will come” attitude.

There are certainly quite a few moving parts that need to be considered, e.g. the obvious ones of planning & zoning, construction costs, expected future revenues, & so forth.

However, one of the more imperative items is to conduct a Market Supply Index so that you can determine the level of Storage supply versus Demand.  In other words – in a 3-mile radius around the proposed site, how much available storage is there (vacant or occupied doesn’t matter) divided by the number of folks (per capita) who live in that radius.  The national range for equilibrium is 6.5 – 7.5 (though it may vary in local markets).

You’ll also want to scout out the competition to see how they are doing – what is their occupancy, street rates, etc. so that you can do some “back of the napkin” figuring on your own to see if it makes sense to move forward.

Please note that if you’re going to pay for this all on your own with cash, you can do whatever you want.  But if you’re going to use outside funds (e.g. the bank, investors, etc.) you’re going to need a 3rd party Feasibility Study.  And you will want to do as much of the legwork, research, modeling, forecasting, etc. before you just up & pay for a Feasibility Study.

I hope this helps.

Good luck!

Scott

Leave a Reply

Your email address will not be published. Required fields are marked *