Factors of a Successful Storage Site for Development

Storage Facility Development

When looking to invest in commercial real estate, there are many different investment options available, including multi-family, office, industrial, and real estate. One investment option that is frequently overlooked is self storage. While it may be overlooked by many investors, self storage owners and developers will find that the ultimate return on investment can be very high. When looking to invest in self storage, there are several factors that should be considered when developing a new self storage facility. 

Cost of Land
When looking to develop a new self storage facility, the first factor that you need to take into consideration is the cost of the land. When going through the due diligence process and developing a budget for construction, you will notice that land is one of the most significant overall expenses. The cost of land can also fluctuate considerably from one place to the next. Regardless of the site you choose, be sure that the land price is affordable enough as to where it will not impact your return on investment.
Site Selection
As you are going through the process of developing a self storage facility, another factor that you should consider is site selection. You will need to carefully review all available sites to determine whether they meet your specifications. In most cases, it would be ideal for you to choose a site that is located in a more urban environment. Urban environments tend to be more densely populated with people living in smaller houses and apartments. In many cases, they may not have enough space to put all of their personal belongings. Because of this, there could be a much higher demand for self storage space. Once the facility is developed, this increased demand will allow you to charge higher rates and will lead to overall better cash flow.
When you are looking to develop a new self storage facility, you will also need to carefully review all potential competition in the area. During this process, you will need to find out what rates your competition is charging, what services that they provide to their customers, and possibly what their overall occupancy and profitability is. This will help to give you an idea of what you could reasonably expect to charge for rental space and how easily it will be to keep your new facility occupied.
Potential Sales Price
If your ultimate goal is to sell the self storage facility, you should also figure out what you could ultimately sell the property for. There are many self storage investors that are willing to pay a premium for new and stabilized facilities. To determine what the ultimate sales price could be, you will need to first complete stabilized projections to determine the ultimate net income once the facility is filled up. Then you will need to find out what the market cap rates are for comparable facilities, which can then be used to figure out the ultimate valuation.