building storage units

[Andrew Tegeler]

Has anyone ever built storage units from ground up? I bought a property this spring that came with an extra lot, its 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?

[Scott Meyers]

@Charles - thank you sir!

Hey Andrew!

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 just "build it and they will come".

There are certainly quite a few moving parts, 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 to determine the level of Storage supply versus Demand.  IOW - 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. Please PM me if I can be of any more assistance.

Good luck!

Scott