Determining Demand During Due Diligence

You always want to check out your competition when you are deciding if you can buy a property. If an area is over supplied or if you are out located, it will be difficult to fill your new self-storage facility. When you are buying an existing facility, you need to know if the facility is not occupied because of poor management or because of a bad market. This is also true when you are converting a property or putting in a new facility. You don’t want to add self-storage to an oversaturated market.

Only 10% of the population uses self-storage. If every one of those people has already stored their belongings, there isn’t going to be any more demand. You need to look at the demographics to see if there is still demand or if the demand has been met. It may sound complicated, but it isn’t, it is just time consuming.

The first thing that you need to determine is what is the current demand for that market and whether or not there is enough inventory to meet that demand. If not, then there is room for your project. If it has been met or if the market is oversaturated, then you may want to look for a project in a different location. You cannot create business. People either need storage or they don’t. No amount of advertising is going to change that.

Start by doing a demographic report. Most people rent within 3 miles of their home. It can change depending on if you are in a rural area or a crowded urban area. It can also change if there is a major boundary like a state line or a city line. If your 3 miles crosses a major border, stop, and shorten your area. Now you want to find out what the population is for that area.

While you are looking in that area, you also want to find out how much competition there is. Start by looking to see if you are out located. How many self-storage facilities are between you and your market? Will they drive past those facilities to get to you? Probably not.

Then you need to find out what condition those other self-storage facilities are in. Are they new? Are they well maintained? Will you out locate them? Will you be more visible than they are? Who has better access? Access matters when people are driving a big truck that they are not familiar with. What are the other self-storage properties current occupancy levels? What are their current rates? Are their rates lower than what you need to make a profit?

Now that you know how many people there are in the area and you know roughly how much storage is available, you can determine whether or not there is a need for storage or if there are already enough units in that area. Your competition can make or break you so be sure to check them out during your due diligence. As always, happy investing.