Self Storage Development versus Buying Existing

[Robert Carraway]

Anyone with experience developing a new self storage facility?  If so, what are the conditions that make for an ideal development opportunity?  Any pros/cons versus just buying an existing facility?

[Terry Campbell]

I've been 'involved' in about 40 million sf of new self storage development, have been a partner on a 76,000 sf facility that has been sold and am a partner in a new 120,000+ sf facility that is about to break ground. You can make more money by building vs buying if you can stomach the process that you have to go through. The key is building in the right location. You need to have a feasibility study done by someone who has a lot of experience in the industry. Then you have to manage the construction time and costs. Once you get it built, the fun starts....getting those units rented. From the day you open until you break even is sweat time. You have to be sure that you have enough working capital to make the payments and pay the operating expenses. There is a rental season in most areas as well unless you just have a major pent up demand, so you will want your opening to coincide with the beginning of that season if possible.

Self-storage conversions are also great opportunities....this is where you take an existing building and convert it to self-storage. You can get into the business much faster sometimes than you can by starting from the ground up.

You can make good money buying an existing facility too, but it really should be a situation where there is a value add possibility such as a mismanaged facility where rates haven't been kept current or there have been delinquencies or maybe an opportunity to expand.

I was with a self-storage building supplier for over 20 years before becoming a self-storage lender, so I have seen the business from different perspectives and I enjoy passing along info as I can to those looking to become part of our industry.