The A to Z’s of Self-Storage Feasibility Studies
What is a self-storage feasibility study?
A self-storage feasibility study provides recommendations about whether or not your project is viable by analyzing the economic and social characteristics of the market in which you want to build or expand. If the proposed facility is viable, the study gives recommendations for its development and financial projections.
What should a self-storage feasibility study include?
An analysis of your site’s physical location including the neighborhood, traffic counts, zoning and employment and economic development trends
A determination of your site’s primary and secondary trade areas—the actual boundaries of your customer base
Evaluation of the demand for more self-storage in your trade areas
A summary of competitors’ strengths, weaknesses and the opportunities and threats they pose to the proposed facility
Recommendations for the type of self-storage facility best suited to your market as well as its unit mix, pricing model and construction phases
A twenty-year proforma detailing operating expenses, lease-up, cash flow and net operating income
A sensitivity analysis accessing risk by stress testing variables such as the lease-up time period and occupancy rates
Marketing communications recommendations
How is demand determined in a self-storage feasibility study?
The most common method is to analyze self-storage demand per capita using industry statistics, occupancy levels, and proposed facilities under development. However, a responsible consultant will also evaluate barriers to entry, labor force payrolls, rental rate trajectories, and demand per household.
What isn’t in a self-storage feasibility study?
Construction bids or a full-blown property management plan aren’t included in a self-storage feasibility study, nor is a step-by-step guide to develop or market the facility. The study’s purpose is to evaluate the site’s viability and project its income. The study serves as the basis of your business plan, and most importantly, an independent review of the proposed project by an expert with no emotional or financial attachment.
What kinds of self-storage feasibility studies are there?
Typically, self-storage feasibility consultants offer two types of studies:
A remote desktop feasibility study evaluating the site, its demand, and if deemed viable, projections of the proposed facility’s gross scheduled income. The purpose of a remote study is to determine if the site is worth further investigation.
A “full” feasibility study usually includes an in-person visit by the self-storage feasibility consultant to evaluate the site and competitors. This data is needed to make accurate development, financial and marketing recommendations and projections.
“Reverse” feasibility studies may be conducted to identify viable submarkets to look for land. After land is identified, a full feasibility study confirms the viability and details of the proposed facility.
Why do I need a self-storage feasibility study?
The reason you need a self-storage feasibility study is because when you are making a multi-million dollar investment, you need an impartial review to “know what you don’t know.” You need to make sure you are making factually-based decisions (as opposed to emotionally-based decisions), that your site should produce a return on investment acceptable to you, risks are known, and you are comfortable with them.
Banks often require an expert verification of the project’s viability as part of their underwriting process. Investors are more likely to trust you with their money if a third-party has thoroughly analyzed and poked holes in it. And your significant other wants to make sure you are not going to lose your shirt on this project.