Misconceptions about Self Storage Development

Right now the self storage industry is in a construction boom, with many self storage facilities under construction all across the country. This holds especially in the Great State of Texas. Investors are seeing high yield returns from developing self storage facilities, and while the demand for self storage units continues to increase in high population density areas, it’s not always as simple as it seems. In this post, we’ll cover some of the the most common misconceptions associated with developing a self storage facility.

Common Misconceptions about Self Storage Development

It'll Fill Up in 12-18 Months

While yes it is true that demand for self storage units in high population areas, such as Austin, San Antonio, and New Braunfels is at an all time high, many factors play a part in how long it will take for the facility to reach capacity. To help set realistic expectations, filling a 50,000 square foot storage unit facility within 12-18 months is nearly unheard of in the industry. In general, it takes 3-4 years for a 50,000 or greater square foot facility to reach 85% maturity. Remember, you’re investing in self storage properties for the long term high yield gains, not for quick turn around low yield wins.

A Small Facility is Better

While it may sound counterintuitive, building a facility under 40,000 square feet is not nearly as cost effective as building a facility of 50,000 square feet or greater. Some of the reasons for this include: storm water management costs, on-site management costs, and other fixed operating expenses. The only time a self storage development project would be worth investing in at less than 40,000 square feet would be if there were plans to add on to the facility, thus eventually taking it over the 50,000 square feet mark.

Online Marketing is the Only Way

We’ve mentioned the past that site location is arguably the most important aspect of choosing where to develop a storage facility. It is dangerous to bury your new site at the back of an industrial park, residential neighborhood, or on a back road. Filling the units will happen at a much slower pace, even with significant investments into online marketing. Costs for digital advertising can quickly balloon out of hand, and at “good” conversion rates of about 1.5% for paid search advertising, it is hard to see high ROI. The most powerful marketing tool you can use at a self storage facility is to have self storage doors visible from the road.

Already Owning the Land = Cheaper Development

This thought process, “I already own the land, so the investment will be cheaper,” is a logical fallacy. Here’s why: You need to ask yourself “Would I buy this land from somebody else and develop it into self storage?” If you build a self storage facility on a site without demand in the market, and then your facility takes five years to fill up; you could potentially go bankrupt on it with carrying costs. That’s rare, but more importantly, you may be missing out on more lucrative opportunities to sell the land for another use and build self storage elsewhere.

A Housing Development was Built Nearby

Cities like Austin and San Antonio are expected to see significant population growth well into the next decade. With population growth comes the demand for housing, and thus housing developments are constantly being built outside of these metro areas. However, it can be very tempting to look housing development and assume it will drive demand for self storage units. When calculating potential demand for self storage, it is wise to dismiss new housing developments as it can take several years for the development to fill with residents.

Self Storage Doesn't Work in Rural Areas

Many self storage sites are developed by investors who live close to the development site. They know the community and have found an opportunity for development through their personal networks. If you are casting a wider net to look for a development opportunity outside of your area, we encourage you to not overlook rural areas. If you are interested in developing a self storage facility in rural Texas, reach out to our team today and we’ll help conduct a supply and demand study to see if a self storage development is feasible. Many profitable self storage facilities have been built in rural areas.

Casey Development, Ltd: Self Storage Developers in Central Texas

Now that we’ve highlighted some of the pitfalls and misconceptions investors can run into when developing self storage facilities, let the team at Casey Development, Ltd. show you the proper way to build a self storage facility. Our team of self storage facility development experts are standing by and ready to help you start your next self storage development project in Central Texas. Contact us today.