How to Calculate the Demand for Self-Storage in Your Market!

There is only so much demand for self-storage in a market. You don’t want to build in a market that is oversaturated, and you don’t want to buy in a market that has no demand left. You cannot create demand. Only 10% of the population usually uses self-storage. Because of this, you don’t want to build in an area where everyone is already storing and there is still plenty of empty storage left. In order to avoid this, you are going to evaluate the demographics that we have been gathering.

The first number that you need is the number of units that are in your market area. In the last blog, we talked about how to approximately determine how much square footage your competition has in self-storage. After you have done this research, and added them all up, you will have a total number of square feet of storage in your market area.

The next step is to determine what the population is for your market area. You can usually get this from a demographic’s website like www.easidemographics.com. Once you know how many people live in your market, then you can determine if there is a need for more self-storage or if the market is at equilibrium. This will also help you to know if the property you are evaluating is being mismanaged or if the market just won’t support more storage.

If you determine that the population in your 3 mile radius is 1,543,875 and that there is roughly 174,623 self-storage units in that area, then you have everything you need to determine if the market is over saturated or under saturated. You are going to start by dividing the population by 8.32. This will tell you how much square footage you are going to need for the population density in your market. In this case if you divide 1,543,875/8.32 you will find out that you need 185,562 square feet of storage. This means that your market is slightly undersupplied. However, if you build more than 10,938 square feet of storage, you will oversaturate the market.

In this case study, if you are buying a property that has a terrible occupancy level, there is a good chance that it is the management. If you are planning on building, you may want to do more research before you move forward.

The demand in your market is only one of the factors that you take into consideration when you are evaluating a property. If you are really serious about a property, you will need to get a feasibility study. However, these smaller studies can give you a pretty good picture of whether or not it is a waste of time to move forward. As always, happy investing.