How to Determine if There is Demand for Self-Storage in your Location!

Anytime you are thinking of building a new self-storage facility or converting a building into self-storage you need to make sure that the market will support another facility. You don’t want to build in a market that is already completely saturated or even oversaturated because you will have a hard time getting to your ideal occupancy levels.

The first thing that you need to look at when evaluating a market is the growth of the area and the projected growth for that area. A stable growth rate is 2%-7% anything lower than that could be problematic. You can’t rent to people if no-one lives there. The second thing that you need to know is the density of the population in that 3 mile radius and finally you need to know the income levels in that area.

The reason that these3 things matter is because if people are leaving and not coming back, they are probably taking their belongings with them and there won’t be anyone to store with. The density of the area lets you know what size unit to build. The high-density areas usually want smaller units. Finally, we are trying to make sure that people in that area can afford self-storage. Lower income households can’t usually afford to store and if they do, they can’t afford very much.

Now that you know that your area can handle your self-storage facility as far as the demographics go, lets move on to saturation. We need to know the saturation levels for that area. If the market is over-saturated, then there just isn’t any more demand for self-storage. You can build the most beautiful facility but if there is no one left, it will sit empty.

Start by finding all of self-storage facilities within 3 to 5 miles of your project site. Then you are going to approximate how many units each of them has. You can do this by going into the county website and finding out how many square feet they are being taxed for. Once you know this, you can use our formula from the last few blogs to estimate how many units they have. Basically, you will take the square footage and divide that by 110. Now you have an approximate number of units.

Once you have all those units, now you need to know how many people live in that area. You are trying to get a number that is as close to accurate as possible. Go to a demographics website and find out how many people live in the area you are building in.

Now that you have those two numbers, you need one final number and that is your saturation point. On average, the national saturation point is 8.32. This means that each person uses about 8.32 feet of self-storage. Now this isn’t a perfect number, your feasibility study will give you perfect numbers. You are just trying to determine if you want to make an offer and get a feasibility study done.

So, if you find out that the population in that 3 miles is about 24,000 then you will multiply that by .0832. This will give you the number of storage units that that 3 miles can handle or 1996.8. If you find out that there is 150,000 square feet of self-storage already in the area, then you will know that there are approximately 1363 units in the area. This means that there is still demand for self-storage. On the other hand, if there is 250,000 square feet of self-storage in that area, then there are approximately 2272 units and that is why they are all about 87% occupied. If you come in and build, you will lower the occupancy level of all the storage facilities because you can’t create demand. You would over-saturate the market in that area.

Always do some preliminary research in an area before you spend the money on a feasibility study. This study is necessary to convince your partners and the bank that this project is worth moving on, but you want to make sure that you have done your own due diligence first. As always, happy investing.