The self storage world has never been as easy and as complicated as it is right now.
There are a lot of software programs out there that make it easier.
There are a lot of software programs out there that make it more complicated.
In the old days if we found a site we liked our analysis of the market consisted of calling the competition. We would try to find out if they were full or not, offering discounts, etc.
If we were unsure about a market we might even pull up the surrounding self storage facilities on Google Earth. We would try to approximate their size and pull the demographics from the marketing package or another program subscription. We would then “estimate” the square feet per capita of self storage in that market.
I always knew I had the feasibility report to back me up.
But once you’ve spent $30,000 to $40,000 in a year on due diligence that didn’t pan out you’re cured of conducting an analysis that way real fast.
It has never been more important to know the “supply/demand” of a submarket you’re looking in for a self storage project.
When I was working with retail clients in the commercial real estate business, there were many tools available to determine if a store would work in a specific location.
I would first pull up reports showing spending for that market area to determine the discretionary spending in that trade area. Then I would pull up a “gap analysis report” showing what retailers were missing from that trade area.
The only problem is self storage does not show up on those reports.
Yet (I hope).
The metric our industry uses is square feet per capita. How much self storage is currently available per person?
It turns out the average in the U.S. where a submarket is in equilibrium is about 7.5 to 8 square feet per person.
Now in some markets or cities, this is higher and in some lower. But on average today about 7.5 to 8 square feet per person works.
Now in my humble opinion, and humility is often reinforced by my mistakes, that is a good but incomplete metric.
In the “retail” world, spending power is the other side of the equation on top of supply.
There are no reports I am aware of that have self storage as a retail item that is being tracked as far as spending goes.
I will see if we can work on that. But until it is, all we have to look at is “average income” in the market area.
As I stated in Episode 175, I look for a minimum of $40,000 to $50,000 average income in the 3 or 5-mile radius of a facility. In denser cities, like let’s say San Diego (I was just there and love it), I would look for the $50,000 number or more. Let say in Pensacola Fl., the $40,000 plus is OK at the early stages to consider a site.
Without a lot of metrics the rest of the retail world uses, this is what we now have.
And it is critical you use it today.
It has never been more critical than it is today.
There is so much new storage hitting the market, if you are considering a site you better be very sure of the supply/demand or it could be the last project you do.
Which brings me to a new thing I now also track that I never could before without a feasibility report.
“Product in the pipeline.”
How many projects are under construction or about to be approved for that trade area.
Again, never been more important.
“Well, how do I find out all this information without getting a feasibility report?”
You buy it.
Yes, this is a new cost we didn’t have before. But as I often say, this industry is evolving fast now.
“Where do I buy it?”
ISS has reports for different markets you can buy through their store.
I have done that in the past.
There is subscription software like REIS [https://www.reis.com/] and Yardi [https://www.yardi.com/] that have many markets in them (and growing all the time).
These subscriptions are expensive but if you’re looking at multiple markets I think something like this is critical now.
When I’m working with a coaching client and looking at a site, the first thing I do is pull it up in my subscription program. We check the square feet per capita, population, average income, pipeline and then look at rents in that area.
That lets us know if this site or project is even worth running the analysis on, much less trying to tie up until we can get a feasibility report.
Until the industry evolves more, this is the best metrics we have to protect us from buying or building in an overcrowded submarket.
One thing I have learned is my gut is not a real good gage.
That is a bad metric to use. It’s hard to explain to lenders and partners as well.
Numbers work so much better.
They also make me sound smarter than I really am when I talk about “supply” and “gap.”
If you are interested in getting a “preliminary” report send me the address of the potential project at Mark@helmproperties.com or reach out to me through the contact page at CreatingWealthThroughSelfStorage.com. I will see if I have the data to run a report for you. I do emphasize the word “Preliminary” because these reports do not replace the feasibility report.
If I have access to data for your submarket the cost of the report is $350 to help fund the cost of the subscription software.
Or estimate it yourself like I used to do. Whatever you do, do not build in an overcrowded market. It is not fun.
I speak from experience.
