Self-Storage Research Services
Some people interested in the business of self-storage are still under the impression that it is an easy to enter, almost fool-proof way to make incredible amounts of money.
That may have been true years ago--but no longer. Self-storage has become a sophisticated, multi-billion dollar international business. It is no longer enough to throw up a cheap building and wait for the money to start rolling in. It costs over one-million dollars now to build or buy even a small self-storage facility.
You really need to be well prepared before entering the business. Even experienced parties need to do research before starting on any particular development project or acquisition.
If you are planning a self-storage development or investment in an existing facility you should have a market study prepared by an independent consultant--no matter how much experience you have in the industry.
You will need a study to justify a major investment decision to your partners, outside investors, your lender--and yourself. You may also want a study for planning purposes: How much to build and how to design it.
An independent consultant is advised because: (1) You may not have the time or the expertise to conduct a thorough study on your own. (2) You probably also carry some conscious or unconscious biases that will influence the reliability of your analysis and conclusions.
What self-storage developers and investors typically want to know:
Is the market saturated?
Is this a good site for self storage?
How much storage space will the market absorb here?
What should the rents be?
Should I plan to build climate controlled storage? How much?
How should this development be planned? What should the unit mix be?
How much will it cost to develop and build?
What is the cash flow potential?
Here's a brief description of each type of study:
· The market for a project to be developed on a specific site
You have a site under contract. Now you need to be sure that there is a market for the self storage project that you are thinking about building there. This type of study is designed to tell you:
How well suited the site is for self storage development.
The size of the market in the site's trade area.
How much competition there is. And how strong it is.
The project's absorption potential.
How large the project should be.
Whether to phase construction, or not.
General design parameters, including mix and number of stories.
Services and amenities to provide.
What rents to charge.
· Market analysis with financial feasibility analysis
This is just like the study outlined above, with the addition of analysis of the project's financial feasibility. (Some clients prefer to do their own financial feasibility analysis.) The study looks at potential gross revenue, vacancy, probable expenses (based on industry averages), net income, cash flow and return on investment. A more detailed financial analysis can also be prepared.
· Analysis of an existing facility targeted for purchase
There are several questions about the specific project and the market that should be answered before making an investment. This type of study may include, but is not limited to, the following issues:
How good is the location for self storage?
How large is the market area that this project serves?
How is it likely to change over the next few years?
Is the current unit mix appropriate for the market?
How is the competitive environment likely to change over the next few years?
Is there good potential for raising rents?
What improvements and changes, if any, would make the project more competitive?
· Site comparison analysis
Let's say you have several sites under option in a certain market. Which are the best for self storage? How do they rank, in terms of opportunity for successful development? This type of study is designed to answer these questions. Considerations include characteristics of each site's location; characteristics of the market around each site; supply and demand around each site.
· Market overview/market niche analysis
This type of study is useful for those who want to expand to additional locations in their current market as well as those who want a detailed look at a different market that they are considering expanding into. This study tells you where to look for sites.
This type of analysis involves studying an entire urban area, or a large section of an urban area. The goal is to compare supply and demand across a large market area and determine which submarket areas could support additional self storage space, including general conclusions on how a new project should be positioned in the market, by size, price and services offered.
· Market search
If your company is in an expansive mode you may be considering branching out to other markets. Where should you look? How do the markets you are considering compare in terms of opportunity? What is the competitive environment like in these markets? What is the development environment like? This study is designed to answer these questions, in broad terms. It will tell you which markets to avoid. And which merit a closer look (such as a market niche analysis).
How Stratton Research studies are done:
The first step is a meeting, in person or over the telephone, to discuss the questions that the research should be designed to answer. Chances are the research design will fall into one of the types discussed above.
Most studies require a visit to the market area to get a firsthand look at the site and the competition, and the market as a whole. There is really no substitute for the kind of information that can be gathered by driving around the market area to look at properties, get a feel for traffic, roads and different neighborhoods and to talk to facility managers and other sources of market information.
Much additional work is done back in the office, where analyses of supply and demand are prepared. These rely on interviews with sources in the market; published data on the economy, employment, population, housing and business activity; mapping of the site, the competition and sources of demand; and a lot of number crunching.
The report really comes together in the process of writing. Information is presented in a logical, organized manner. Different sections of the report focus on the site, analysis of demand and analysis of the competition. Statements are backed up with facts. Conclusions are justified by analysis. The facts and the results of the analysis lead us to our recommendations, which are presented in the first section of the report.
You will receive two copies of a bound report containing narrative, statistical tables, graphs and other illustrations and material, as dictated by the needs of the study.
Here are the contents of a typical market study with a simple financial feasibility analysis for a specific site:
· Section I: Summary and Recommendations
Primary recommendation: Proceed with development. (Or don't--see below.)
The necessity of phasing construction.
Sizing of the phases.
Where to place the first phase on the site.
Self storage demand in the immediate area around the site.
Project's probable market share in the immediate area.
Total demand in the site's primary trade area.
Evaluation of competitive supply.
Project's absorption potential considering all sources of supply and demand.
The need for climate control, RV parking and other services.
Results of financial feasibility analysis: Net income; development costs and financing; cash flow; cash-on-cash return.
Supporting tables, graphs and maps.
The outline above pertains to a project that our analysis indicates is feasible. If the project does not look feasible, we state this in the first sentence. Then we go on to discuss why we don't recommend proceeding with the project. Reasons may include problems with the site; too little demand; too much strong competition; high costs; low rents; or other problems. It is possible that the site may be premature--that is, that market conditions might be better for development sometime in the future. We try to determine when conditions will be better and under what circumstances. We also try to suggest alternate uses for the site, if self storage does not appear to be the best use at this time.
· Section II: Analysis of the Site and Demand
Review of the site and its characteristics, including:
Potential problems (regulatory, environmental, etc.)
Site shape and size.
Evaluation of surrounding land uses.
Definition of the site's primary trade area.
Review of the demographics of the primary trade area, including:
Renters and owners.
Analysis of the type of housing in the area.
Growth trends, which may include commentary on the economy and growth of the county that the site is in.
Commercial development in the trade area.
Presence of large numbers of students or military.
Projection of self storage demand:
Demand from households.
Demand from businesses and institutions.
Supporting tables, graphs and maps.
Identification of all facilities potentially competitive for a share of the market that the subject site will serve.
Analysis showing the competitive impact of each of these facilities.
Determination of the total amount of space that is available to the households and businesses in the site's primary trade area.
Evaluation of the quality of each competitor.
Discussion of the most important competitors, including those nearest the site and those with the best quality ratings.
Survey of rents and occupancy rates of the competitive facilities.
Discussion of how the subject site stacks up against the competition.
Supporting tables, graphs and maps.
This is usually an analysis of the national self storage market, which provides justification for some of the assumptions used in the site-specific analysis. It may also include analysis of the local metro area market.
Time needed to do a study
About three weeks are normally required to do a good job on a site-specific report. This allows for time to travel to the market area to do the required field research; follow-up from the office; other information gathering; analysis of supply and demand; report writing and review; and report production and shipping. A market overview report on a large area might require more time.
Fees and expenses:
Fees vary according to the nature and scope of the research project to be undertaken. Fees and expenses can be detailed only in a proposal to conduct a specific research assignment.
We normally ask for reimbursement of project-related expenses, such as travel to the market; living expenses while there; purchase of research materials and data; long-distance telephone charges; report reproduction costs; and shipping. We can provide an advance estimate of expenses.