How to evaluate a warehouse for self-storage opportunity?

Question

I’m a real estate investor looking to turn a pair of warehouses into self storage. Not sure how to evaluate the market, uncover potential pitfalls and how to evaluate this specific property.

The parcel is one acre and has a pair of large warehouses with electrical, but no heat (built in 2012). It has a bit of room between them for potential gated or outdoor storage.

The property is next to a another storage unit that is at capacity, and a municipal airport. The property is in a sparsely populated area, but it’s halfway between a city of 300k and a popular resort town (boating).

I think I’m looking at a solid opportunity, but I’m new to self-storage. Any tips or guidance for evaluating the deal would be much appreciated.

Taylor L. · Answer

My first step would be to quantify the demand a bit. How have you determined that the nearby property is at capacity? Have you called to check if you can lease a unit?

Here is a very interesting calculator that will give you an idea of the metrics to look for: https://www.trachte.com/resour... While the Trachte calculator doesn't do the full underwriting for you, it does give you a good idea of what to look at as a jumping off point.

Ronald Rohde · Answer

This can definitely be done, have you gone on sparefoot?

You need to confirm zoning and use with P&Z, renovation costs, are you putting metal studs or just chainlink between units? ceilings?

If its your first SS play, I'd partner with someone else, You're essentially turning two business plans into one big project. Legal, title review, lender documents, it can all get quite costly before you receive any revenue at all.

Scott Krone · Answer

@Karen Johanson - Great question.  There are many factors to consider when evaluating a property for self storage.  As @Taylor L. and @Ronald Rohde have astutely pointed out, demand and zoning are both very important.  Demand is quantified as the square footage of lockers per capita (sf lockers/capita).   Typically, across the country 7 sf of lockers/capita is market saturation.  However, in certain markets the number has increased from 9 to 11 and even 13 sf/capita.  As a developer of self storage, our goal is always to be under 7 when our facility comes on line.

Zoning is also a critical component.  We have experienced many municipalities that have approved storage via their zoning for a site, and yet still do not want it!  If the site is zoned for storage - great, if not, then talk with the city planner to guage the receptivity of the municipalities board.

Construction type and access.  These are also important factors to assess.  Access will impact your unit density and ultimately your gross potential revenue.  The construction type can also play a factor in the feasibility of the product - column layouts, ceiling heights, structure capacity, etc.  They will impact your costs as well as your revenue stream.  These are the main components that we assess when determining if the building is right for storage.

Paul Moore · Answer

Hi @Karen Johanson, this could be a fantastic opportunity! Or not. You've received some great advise above from some veterans.

I would use radius plus (https://www.radiusplus.com) to evaluate the metrics. Like @Scott Krone said, hopefully you will be under about 7-8 sf of storage per person in a 3-5 mile radius. You should also evaluate whether the facility is on a main road with great visibility and with a medium to high income area.

Feel free to PM me if you would like to discuss other details on this opportunity. I agree that it might be best if you want to partner with somebody on this. You might want to use Scott Myers, a BP professional, who could direct you into evaluating this further. @Scott Krone is a great resource as he has done this many times. Goodluck!

Ronald Rohde · Answer

Thats absolutely common and even if zoning as a right, they may want fencing, shrubbery, certain colors facing residential districts, landscaping on frontage, etc. It is death by a thousand cuts on cost if you're prepared to either A) pay it or B) fight it. I find a lot of clients don't want to pay a lawyer when they are just experiencing more delays without receiving revenue. They'd rather pay the extortion and get "landscaping."

SS zoning is still very broad and if the operator thinks of adding vehicle storage, that may be permissible, but not boats. Or RVs but only under a certain height/weight, the nuances of an active PZ are maddening. But those are the rules you play with for new construction!

Karen Johanson · Answer

Thanks all for the great input.

Scott, I'm not going to move on it, but I can refer you to the seller if you are interested in the project.

Scott Meyers · Answer

Thanks Paul, and nice to "virtually" meet you Karen!  I'd be happy to help as we have a great deal of expertise in converting warehouses.  Feel free to reply or DM Me.

Talk soon,

How to evaluate a warehouse for self-storage opportunity?

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