Self Storage

102 Replies

@Steven Libman all in Orlando? I see that listed as one of the overbuilt markets, but I think that’s just an easy thing for storage ‘experts’ to say right now about a few metros. Kansas City is another not too far away from me that most are saying is being overbuilt as well.

Does Cube Smart do the feasibility study for you as well?

@Zach Quick , yes, all in Orlando.  We do our own feasibility  and then cubesmart does a secondary one with drilled down unit mix (we were also provided one from the land seller for further redundancy). As to being over built, it would depend on which 5 mile radius you are looking at but our facilities meet less than 1/2 the current demand in each location.  Heres a time lapse video thus far on 1 location https://app.oxblue.com/open/is...

Originally posted by @Steven Libman :

@Zach Quick it depends on size of course, but these are 100k+ sq ft averaging 6 months build time and 18 months lease up

 I feel compelled to point out that while this is "possible" and am in no way suggesting that what is posted here isn't factual, it is FAR from what one should expect when developing!  Industry average ramp up is close to double that 18 month bar @ roughly 3% per month. Here's a recent article from ISS:



https://www.insideselfstorage.com/development/busting-9-common-misconceptions-about-self-storage-development

@Michael Wagner thanks for pointing that out.  Our absorption is of course dependent on market demographics.  All 3 feasibility consultants as well as cubesmart laid out the timeline, and the banks 3rd party agreed with them.  Market specifics matter here 

Originally posted by @Zach Quick :

@Steven Libman @Michael Wagner For sure, good to point out. Toured a facility in phase 1 this week that was 50% full (300 units roughly) and they were only 10 months in, but yes, most don’t fill up quite that quickly.

 I have a 70,000 square foot warehouse that we are converting to self storage. Phase one is underway now (First 45,000 square feet with 34,000 rentable)....I hope and pray that we can match the numbers you guys are seeing.  Our market study is very favorable and was confirmed by a 3rd party feasibility study but its always a question mark until the doors open:)! We hope to be open by November.  Appreciate you guys for the continuing conversation around storage!

@Michael Wagner Do you mind me asking which vendor you are using for your conversion project?  I am researching a possible conversion property in CA and have inquiries out to Trachte, Janus and Mako (still waiting to hear back from all!).  This would be a 2 story conversion as we have 20 ft clear space.  Are you doing 2 stories?

Originally posted by @Trevor Walker :

@Michael Wagner Do you mind me asking which vendor you are using for your conversion project?  I am researching a possible conversion property in CA and have inquiries out to Trachte, Janus and Mako (still waiting to hear back from all!).  This would be a 2 story conversion as we have 20 ft clear space.  Are you doing 2 stories?

Mine is only a single story and I am using Janus.  They can be slow to respond but overall I have been pleased.  Rubber meets the road later this month when install starts.  I've used Trachte for traditional buildings in the past and have also been pleased.

 

I have known a lot of people that have made a lot of money with Self-Storage facilities. My biggest question for people already investing is what makes a market ideal for self-storage investing? What markets don't work? Thanks

@Scott Meyers and @Michael Wagner - I really appreciate your comments here. Is the saying "location, location, location" still a factor today even with self storage in saturated markets? In other words, if I can acquire a prime freeway access property (190k daily traffic count) and build for less than acquiring a facility ($25 to $28sqft), with competition all over my 3 to 5 mile radius, although there are multiple new housing developments and apartments going up ->-> would you even consider it?

I Know there are a lot of factors to consider and a short feasibility study I received wouldn't support this project (except RV & vehicle storage as a better option according to report). After a lot of prayers and boots on the ground, I just keep gravitating towards it because of the LOCATION. I even have an appointment with the city to see about rezoning. The nearest competitor has terrible reviews, the visibility would be perfect for a freeway sign, the price of the land is reasonable for 3 acres plus a house. I also realize 2 to 3 years for at least 85% occupancy. I've prepared an LOI and want to pull the trigger, but nervous. Appreciate some wise, godly perspective - Thank You!

@John Culotta , Scott does more development than I do so he might be the better one to answer these questions for you but here is my take.  Yes, LOCATION is still very important in the storage industry.  Perhaps not quite as critical as it used to be given our ability to compensate with a strong internet presence but still important for sure! Visibility is highly beneficial but Accessibility and "strategic location" are also critical considerations! Are you right at a highway exit or midway between? Are you closer to or farther from the customer base?  What is the overall supply/demand?  How full is the competition?  How will your property compare to the competition (aside from the one you mentioned with terrible reviews)?

I don't know that I would personally be "brave enough" even with years of experience to trump the results of a feasibility study unless I had VERY good reason to do so.  Who did your study? Some feasibility studies are worth their weight in gold. Others aren't worth the paper they are printed on. 

2-3 years to fill is a number that you'd use for a market that has existing demand.  If you are truly in a saturated market, you very well could be 3-5 years to fill (if ever...EEEK)....How many new apartments and houses are going up?  How rapidly is the area growing?  

I know I gave you more questions than answers here but these are all of critical importance.

@Michael Wagner - great questions and I can see what your saying. The property is located just short of the exit, but takes only 2 right turns to be there with almost complete visibility of the property while turning. Not sure how full the competition is, but I've been to some of their sites and there are no vacancies on certain size units (the smaller ones). The feasibility report was a free one done by self storage ninjas. Here's an overview: 

TRADE AREA - 3 Mile Radius

• 12 traditional facilities
• 864,595 net rentable sq ft
• 41,175 sq ft climate-controlled
• 823,420 sq ft non-climate-controlled
• 21.2 sq ft per capita overall
• 1.0 sq ft per capita climate-controlled
• 20.2 sq ft per capita non-climate- controlled
• No boat and RV specialty facilities (although, all the facilities in the area have a portion of space designated for this and are usually maxed out)

DEMOGRAPHICS - 3 Mile Radius

• 40,786 population
• 2.0% one-year population growth
• 6.3% three-year population growth
• 12,869 households
• 37% renters
• 26% multi-family
• $44,627 median HH income
• $123,150 median house value ($267,836 county)

YELLOW LIGHT

Pros:
• Climate control likely
undersupplied
• Population growth is great
• Good number of renters good
for turnover and raising prices
• Opportunity for boat and RV
storage

Cons:
• Market may at equilibrium or
oversupplied with additional
development
• 2 facilities built in 2018 may still
be in lease-up (yellow dots)
• Low median house value and
household income - (This seems incorrect. The Median price for our county is: $267,836 according to realtor assoc.)

---------

I'm a strong believer in positioning and feel that being in the right place at the right time (no matter what national trends there are) is super important. Getting in front of progress (without overspending) is what I'm seeing in our situation.

I spoke with the owner of a large chain of 12 storage facilities and they have expanded current facilities for the growth. There are about 3 new unrelated facilities being built within a 3 to 10 mile radius.

Some other factors that I would think should be considered, but please correct me if I am wrong, would be:

  • - Job growth: Over next ten years our city is predicted to be 49.4%, which is higher than the US avg of 33.5%
  • - City & Surrounding Area Expansion: 22% year over year housing increase (the capital which is Boise saw only 10%)
  • - High Visibility - from the freeway since it's up against it and at an exit. 
  • - Traffic Count: 15k daily on main road near property and 190k daily on freeway just in front of property.
  • - The city (5min away) redevelopment with new theatre, city walk, shops, outdoor skating, and more family friendly updates.
  • - REIT's have purchased several facilities in the Boise metro (surrounding cities) area and are building (I wonder why??)
  • - Property is part of the Boise Treasure Valley: One of the top 10 places to live in the US (forbes, money, yahoo, etc.)
  • - Neighboring city Meridian was voted by Money Magazine as one of the best and fastest growing cities to live in the country with 32% job growth in the last decade with only 2.5% unemployment (national avg is 3.7%)
  • - In 3 miles radius there are 3 new housing developments, 1 apartment development, 3 commercial (flex) and manufacturing facilities, with multiple farms for sale for development.

RECENT REALTOR ARTICLE - Demand for Ada County Homes Drives Prices to New Record
According to our friends over at Boise Regional Realtors®, heightened demand coupled with comparatively low inventory of homes continues to drive prices up across the valley. If you compare numbers year-over-year (November 2018 to November 2019) the number of homes pending or under contract jumped by a whopping 20.6%. And newly constructed homes make up an incredible 32.2% of the market share.

Treasure Valley Housing Markets

Average Sold Price (November 19, 2019 - December 19, 2019)

  • Eagle: $589,229
  • Boise: $385,624
  • Meridian: $382,773
  • Star: $415,417
  • Garden City: $399,493
  • Kuna: $328,184
  • Middleton: $331,626
  • Nampa: $280,043
  • Caldwell: $267,836 (this is where the property is located)

All this to say that we've seen unprecedented population and job growth from the capital of Boise which is impacting (The ripple affect) all other small surrounding cities. Our home value in 3 years alone (Caldwell) has jumped from $145k to $240k and we live only 5 min from the site. We're an outdoor recreational state that is home to big companies like HP, Albertsons (2900 stores), BodyBuilding.com, ClickBank.com, TSheets.com, Micron, major hospitals, colleges (BSU) and more. All within a 30 min drive to the east.

I'm not greedy and don't need to hit a home run against the competition, which means I can have lower then average rental pricing to gain market share and still pay the bills. Be very social media friendly, place a freeway sign and self manage. I'm trying to think 5 to 10 years out with appreciation in mind to refi and/or sell. 

There are 2 facilities for sale in the area that are way over priced and they're not even fully (at least 80%) occupied or built. One site is 5acres, 40k sqft, in dense neighborhood about 10min south of freeway and they're asking $4.6mil. I'm looking at building 40k sqft with 3acres between $950k and $1mil (again, freeway access).

I've talked to a few realtors who are taking California cash from investors and buying whatever they can (at asking price or higher) because the investors want out of CA and the stock market and are willing to buy whatever they can in our valley to have more stable long terms returns. The bidding wars on housing in the treasure valley is also very common.

I know this is a lot to digest. I'm grateful for this forum which is so helpful for investors like us who are not super seasoned or experienced in this area - Thanks Again For The Input!

Clearly you've done a lot of digging thus far...And I would encourage you to dig deeper. Your sitting at 3 times the national supply average in a market that has experienced rapid growth in that supply as of late. You don't want to be the straw that breaks the camel's back! Especially when there are so many undersupplied markets out there! 

This personally doesn't fit my investment objectives but since your not me, that's not all that meaningful;). For me, the success of this project seems to hinge on things that are beyond your control. And while those things (population growth etc) seem favorable right now, you are exposed to the local and national economy and local market as a whole to be successful. I much prefer to be able to "force" appreciation rather than merely put myself in a position to "ride" appreciation. 

Keep in mind that I am on the outside looking in but it just feels like you might be trying to "force" a deal here.

My best advice would be to secure a True Feasibility study before deciding how to proceed...and yes that will cost you $3-6k but on a Million Dollar project that's a small price to pay!

Sorry I can't be more encouraging here!

@Michael Wagner - I'm grateful for your insight. I don't want to force anything, but at the same time not sure if I'd be passing up on a smart (long term) business move. Plus, you make a good point, and I..."don't want to be the straw that breaks the camel's back!"

My goal is to also purchase existing value-add facilities and "force" appreciation. That biz plan, however, seems to be getting harder and harder from my not-so-experienced perspective :) It appears that so many people are jumping into this space and competition is greater with pricing becoming more and more northbound. I'm still learning and looking for the best deals. I'm sure you and @Scott Meyers have better resources and channels to finding those deals - Thanks again!

Originally posted by @Scott Rihm :

@Terri Never No, BP does not have a calculator. I am a broker that specializes in self storage, if you need help underwriting a property just let me know. I would be more than happy to help. 

 What areas do you operate in?

Folks, I am here for information for my wife. I have 20 doors that I rent. My wife does not care for the SFR rentals, because she sees me dealing with my maintenance men, contractors and tenants.

She has researched and wants to get into self storage.  I have deeded over 11 acres in Hillsboro, TX for her to either build a self storage facility or use as collateral to buy one.  She has searched the Burleson area, but there does not seem to be much available for sell, but the demand is high, however the cost to get in is rough.  I suggested she put in a climate controled storage unit, with covered boat and RV parking on on undeveloped part of the 11 acres and maybe 100 unit not climate controlled area. 

I welcome your comments and advice that I can pass along.  

@Ron Flatt .  The first step to evaluating what to build is obtaining a feasibility report.  It will discuss the existing supply, current demand, how much is not met, what type of units to build, expected rental rates, and costs.  I suggest obtaining one of those to best answer your question.  Your question is very specific to a specific location, and it requires some study and research.

@Ron Flatt - A feasibility report is a good place to start. Be prepared to spend a few thousand dollars for a detailed in depth report. To just get an idea on what a report will include and get some basic data to start with I used SelfStorageNinjas (no affiliation) and it was free. Again, not an in depth report, but something to start with and combine it with your boots on the ground data, county traffic reports and city data (all free online). I did this to get some peace of mind about what direction to take, which actually led to walking away from a development deal. I would suggest reading everything you can from self storage pros like Mike Wagner, Scott Meyers & AJ Osborne. There's also a book by Marc Goodin that's helpful regarding planning, site selection, design and build info.