Self Storage Site Selection: Why does it matter?
Self storage is all about the fundamentals present in the local area. The average self storage facility in the top 50 markets contains just less than 55,000 net rentable square feet. With an average unit size of 100 square feet, it takes 490 customers to stabilize at 90% occupancy.
Winning 490 tenants may not sound like a difficult task, but if you are building in an area with a lot of competition and downward rate trends, it may be harder to make the deal work than one might think. This is why site selection and a deep understanding of barriers to entry are of the utmost importance when considering a self storage investment.
It comes down to the neighborhood or pocket that you pick to get your 490 renters. Here are two potential markets to consider:
Trade Area A
Population: 30,337
Median Household Income: $99,036
10x10 GCC Rate: $228
Year over Year Rate Change: +17%
Square Feet per Capita: 3.1
New Supply Growth: 0%
Trade Area B
Population: 213,104
Median Household Income: $88,609
10x10 GCC Rate: $175
Year over Year Rate Change: 0%
Square Feet per Capita: 3.4
New Supply Growth: 75%
If you were looking to develop a new self storage facility, which would you choose?
Submarket A is Bristol, RI, where DXD is building a one-of-a-kind self-storage facility. Submarket B is another boutique Northeast market: Bridgeport, CT. DXD has looked at opportunities in Bridgeport but ultimately passed due to the high volume of new supply in the pipeline. While small in population, Bristol has exceptionally stringent zoning restrictions, and the municipality has already denied another developer who wanted to build storage, knocking out any new competition.
It’s not complicated; when much new supply comes online simultaneously, facilities must compete to fill units, which means discounted rates to get people through the door. When you are the only one leasing up, you can charge higher rates, with municipal roadblocks keeping competition at bay: you’ve got lightning in a bottle.
- JT Mitchell
DXD Capital Market Research Specialist
