Self Storage- Will they come? Market size?

Self Storage- Will they come? Market size?

Henry ClarkPro Member
Developer · Member since 2020 · 4k+ posts · 4k+ votes

@P from prior topic, use this to understand the capacity in your market and your best options.  Never go with one offer.  They have the power.  Work in several towns and once and be prepared to make several options with one week time limits on them.  You then have the power.  You are prepared to walk away from a deal.

Not going to give you the answer (maybe if you were Army or Air Force) LOL, but here is the approach.  At the end you will come up with a ratio.  There is already per sq ft metrics out there.  This one you will develop.  Understand it. And most importantly own it.  Once you get your ratio, track me down and we should have about the same ratio (x/100 population).  This should take you two weekends or three days to complete.

Market Demand- “Will they come?”

I'll give you the tool I use, but you will have to make an investment of your own time. Otherwise you don't own the data.

Step 1 "Capacity":
Count the units and sizes in that market. Get headcount by googling the town or zip code. Be aware if the town is standalone, or it might have a large population outside since it is a suburban community to a larger town nearby. Add those people in by using County or School area population.

Example:
Town 1:
#of units/headcount= 300 units in the area/ population 3,000= 10 units per 100 people.

Town 2:
500 4,000= 12.5 per 100
Town 3:
and so on.

Do every stand alone town in a 60 mile radius, or until your satisfied. You will get a High, Low and a average. I have a certain ratio per 100 headcount (not households, not age, not sex) I use when deciding to buy or build in a town. You will get to the same answer I have.

Luckily we are all the same. Death, divorce, fire, home sale, floods, layoffs, etc. No matter whether your Rich or poor, city or country folk. The ratio above works anywhere.


Step 2 "Existing":
In each town count the number of units by size. When I do my ratio I assume all units are the same. Count the 10/15/20's. Any smaller units just make them equivalents of a 10 x15. 3 5 x 10's= 1 unit

Although I am counting them all as the same, the reason, I say count by size is for when you build.

Now lets calculate "Demand":
Number of units needed (Step 1) minus Number of units existing (Step 2) = Quantity to build.

Town 1:
500 - 400 = 100

Town 2:
300 - 100 = 200

Town 3:
and so on.

This will help you pick which town you have the greatest potential for success. "Subject" to other factors that is where you want to either buy or build first. You only need to do the above once. I have kept this ratio in my head since the first time and make all my decisions using it, before I move into a market. If your in a large city, use this ratio. Pick the zip codes in your territory.

Many exceptions to the above.
a. My town has the highest per 100 count around by far, and I am still building. There are reasons.
b. I just built in a town that was not the best of the ratios. But the largest facility with 1/2 the business is 4 miles out of town by themselves.
c. There is a town that is Fully Saturated. No extra unit will ever be rented in it. I would love to build there. Everyone built 10 x 20's for some reason and they did it at the south end of town where the zoning is easiest. I can build halfway to the population who is in the Northend of town and I would hone in on 10's and 15's with some 20's. Everyone thinks they have less than they have. They will rent 10's or 15's first.
d. We are building our last location. Your eyes never stop looking. The best spot I have seen is a cornfield where you can't see a single house. Would loved to have built that one.

You don't know me.
1. Own the data yourself. Don't have me give you the figure. Question the logic, “all of us are the same”.
2. We are in 5 towns, 8 locations. Most are in towns of 5,000 or less. We are in Phase 1 rent up stage in our first large city location (630) and in building stage across town (330).

I have used this tool for all of the Buyouts or build outs above. "Put your money where your mouth is."


Ad Hoc- Traffic counts
Two locations, one with 70,000 Vehicles per day and one with 15,000 per day. Both in the same general area. I picked the 15,000; why? Learn the nuances. Start small and make your mistakes then.

Don’t trust me. Own the info, it’s your money. Everything in the Storage business can be validated.

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Member since 2024 · 1 post · 1 vote
2y

I’m doing the work of reading your posts Henry. I don’t really understand this formula or any of the stuff yet , but I’m writing down things. 

See this reply in the discussion

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  • Dallas, TX · Member since 2019 · 36 posts · 3 votes
    1y

    Next closest major town (100k+) is approximately 40 miles away with a few 3/400 population towns in between. 

  • Henry ClarkPro Member
    OP
    Developer · Member since 2020 · 4k+ posts · 4k+ votes
    1y
    Quote from @Zack Gill:

    Next closest major town (100k+) is approximately 40 miles away with a few 3/400 population towns in between. 

    So you prefer to be in the side of town towards the larger city.  Although doesn’t matter as much for this location.  The smaller towns don’t do anything now.  But if you get this location.  Then you might do cargo containers if allowed at the small locations. 

  • Henry ClarkPro Member
    OP
    Developer · Member since 2020 · 4k+ posts · 4k+ votes
    1y

    @James Hamling  response to your question on the other post.  Please read thru the above.  I'll do a quick analysis for near MN city and attach here.

  • Henry ClarkPro Member
    OP
    Developer · Member since 2020 · 4k+ posts · 4k+ votes
    1y

    @James Hamling   Again from the other post think of Self Storage as "War" and strategy.  Where are the competitors and where are the customers.

    Step 1:  Google Mn city Mn Self Storage.  Go down to the Map and open it up.  It will show red dots for storage locations.  You need to move the map around and expand on areas to get them all to show up.  

    a. I see a lot of the Big REIT names all over town, "Which is good"???????????. Think war. These locations will only do large, multi story, climate control; which you can easily beat hands down. Why?

    b. The larger you are, the more Market area you need to support your location. Say 400 to 700 units. You on the other hand never want to do say more than 200 or 250 unless you plan to sell out to a large REIT, then you need units or space for 300 or more. Strategy, storage market is a circle of say 1 to 3 miles. If they are full, they have already done your market study and the customers are there. Now how do you beat them?

    c.    They will be going after the higher per sqft rental cost, which means the smaller units 5x10, 10x 10 and not the 10x15 and larger 10x20.  They will have the larger size but not many.  You will have more of that size than the smaller, thus you out compete them.    A 10 x 20 will handle a 3 bedroom/2 bath and garage for storage.  Would you rather pull up to an outside drive up access 10 x20 at your place; or do 20 small carts from outside, down a hallway, up and elevator, down another hallway????  You win.

    d.  Rent cost-  your rent will be close to 1/2 their rent.

    e.  Risk management- you can build an extra row of units as needed.  When they build a building, they have to build all of the units and pay the holding cost for a longer time than you adding one row at a time.  Thus, your return is better risk adjusted.  Plus cash outlay.

    f.  Customers always like closer facilities.  Pick the side of the large competitor location and build say 1 mile away from them, where there are more customers.  Strategy- you cut them off.  Cut their Supply chain off.  If  you can build next to them, that is fine also.  Your price and easy to do business will still beat them, plus they supply advertising since the customer drives by you and says hey.  They are $250, let me ask at this place and you find it is $170, plus outside access.

    g.  Climate Control-  who needs it?  Maybe 1% of the people.

  • Henry ClarkPro Member
    OP
    Developer · Member since 2020 · 4k+ posts · 4k+ votes
    1y

    @James Hamling   Next step from above post.  Now do a google search but for "Sparefoot" in your city.  Same as the map above which shows locations with Google map pins.  But this shows people using "Sparefoot" which is the largest advertiser or conglomerator for Self Storage.

    a.  Do the same search.  Then open on the upper left the map.  Disregard prices on the map, this shows for all different kinds of units.  If a location shows on the "Google search map" but not the "Sparefoot" map, they either don't use Sparefoot, or all of that size is full and they "turned off" Sparefoot so they don't get calls and charged for the Reservation.

    b.  Now look at the map and see where your competition is.  On the original page you can filter to see your competition.  Example size 10 x 20; climate control or not; access, etc.  If you don't see anyone in the area with your type available, means they are full and you can increase your price.

  • Henry ClarkPro Member
    OP
    Developer · Member since 2020 · 4k+ posts · 4k+ votes
    1y

    @James Hamling

    Time to look for a place to develop or to pick an existing location to buy and understand how "Strong" that location is.

    Now keep both screens up from above posts.  Compare them.

    1.  Look for the "Black Holes" where no one is for 1 to 3 miles, and there are a lot of lines underneath or Residential blocks.

    2.  Look for where the highest rents are in the city.

    3.  Look for competitors who you can "cut off" from the customers.

    4.  Get both the zoning map and the future zoning map.  Understand what zones storage can go in, special use, conditional use, or Mixed use.

    5.  Secret Sauce- Your city has several Train tracks running thru.  Use your GIS property tax map and follow the railroads and look for any land larger than 1 acre that the Railroad still owns.  See if it is being used.  If not, then ask them to buy.  It should be in a great location in the city, zoning should be okay, or since a Railroad will not allow any Human habitation, easier to get special use.

    6.  Secret Sauce- Look on Loopnet/Crexi.  Look for land or real old buildings with a lot of parking or extra ground.  Only old listings.  See if you can buy cheap, and also check zoning if you can do Parking or Cargo Containers, this makes use of the existing parking surface, even if it is cracked.  Depending on size, this will save you $500k to $1mm in surfacing.

  • Henry ClarkPro Member
    OP
    Developer · Member since 2020 · 4k+ posts · 4k+ votes
    1y

    @James Hamling       

    Secret Sauce- remember War and Strategy.  I use a Wagon Wheel or Spider Web market approach.  Basically the same thing, just the Wagon Wheel uses a large city as a base, and the Spideer Web is for smaller markets spread out 10 to 20 miles.

    1.  All cities roads are built in the general shape of a Wagon wheel.  You emanate from down town, the main roads then spread out like Wheel Spokes, then you have an outer loop road, the main roads get farther from each other the farther out.  Like a Wagon Wheel.  "Strategy"- Closer to the city are the Big Dog REITS or regional competitors.  Don't compete against them, but "USE" them. Traditionally the rate for say a 10x20 is let's say $200 on the outer loop.  Pick one main road and let's say every 5 miles the rate goes down.  $150, $130, $100, $80.  You want to buy or build along that road.  Now your strategy.  Each of the ones you build or buy along this route you increase the rental rate.  So the $150 you move up to $200;  They can't go towards the city since it is also $200 and you are closer.  Then the $130 you increase to $150, and so forth.  Since the Spokes or roads get farther away from each other the further out, the customers can't just go to the left or right to another main road, because it is too far.  

    2. Buying one of the above, you can afford to pay more since the current owner already thinks they are charging to much. But you now have a Business Reason why you can charge more. Even thought $20 per unit doesn't sound like much, that can be a 30% increase in cash flow and profit. Immediately increasing the CAP rate and value of the property on day one.

    3.  Spider Web- basically the same thing as the Wagon Wheel but your out in the country side with towns 10 to 20 miles away from each other.  The more you buy in that spider web area, the more you can increase the price.  Since to get away from you they have to start driving 30 to 40 miles away, which they won't.

    4.  What is different about Self Storage is since my ratio is 1 unit per 6 people, you can control a market easier than housing which requires housing for each person.  And your market is smaller than the housing market.  They have already committed to living in an area and are now looking for Storage.  Whereas Housing, they will move to anywhere in the city to find what they want and the price point.

    5.  Minnesota is a high Rec area.  Build parking storage along the major roads towards the rec areas.  Always preferable closer to the persons residence.  Or near the Rec area.

    6.  Your near ports.  Cargo Containers or Conexes should be relatively inexpensive.

    7.  Summary, although there is a ton more.  Minneapolis is a great market and needs more.  Even if Minneapolis currently had say 10,000 storage units and for all eternity, it would only need 10,000 units, it is still a great market to build.  Because there are to many "Black Holes".

    8.  Remember the harder to find a spot, the more valuable it is.  Less competition.

    "Start small and Make Your Big Mistakes Early".

  • New to Real Estate · Stuart, FL · Member since 2019 · 6 posts · 3 votes
    5mo

    @Henry Clark Trying to run these numbers for a property I found available in a small rural town in FL. Population is 2500 in that town and 8000 within a 10mi radius. Seems to be 1 larger facility with most of the market share and 2 small facilities similar to the one available. I'm having trouble seeing how many units and these facilities on Google Maps. 

    • Henry ClarkPro Member
      OP
      Developer · Member since 2020 · 4k+ posts · 4k+ votes
      5mo
      Quote from @Anthony Colachicco:

      @Henry Clark Trying to run these numbers for a property I found available in a small rural town in FL. Population is 2500 in that town and 8000 within a 10mi radius. Seems to be 1 larger facility with most of the market share and 2 small facilities similar to the one available. I'm having trouble seeing how many units and these facilities on Google Maps. 


       We use  market ratio of 1 unit per 6 people as a rule.  In Google if you can see the end of the buildings.  Usually each section is a foot.   Each door is 10 feet.  

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