Feasibility Studies and Self-Storage Consultants Help New Owners Succeed
Entering a new industry opens up a lot of questions. In self-storage, some of the earliest considerations revolve around feasibility studies and self-storage consultants. A feasibility study is typically required by banks and Small Business Administration lenders. It provides research that helps investors decide whether they can proceed with their self-storage project confidently, or whether they should be looking for opportunities elsewhere. It should help you decide whether your self-storage facility will produce enough revenue to generate a profit after taking care of all costs.
The feasibility study estimates construction costs and determines viability based on size and location, local research (such as population, competition, zoning, etc.), industry standards and trends, and more. The feasibility report may also include an estimate of what the facility might be worth once it’s built and rented. A well conducted feasibility study can cost upwards of $5,000, but it’s a small price to pay versus spending millions on the project only to find out it was an ill-advised investment.
You will want to use a self-storage expert consultant to do your feasibility study. Your work with the consultant can end once you receive the report, or you can pursue a longer-term relationship. Self-storage consultants can benefit you in in the long haul in a variety of ways.
When you are new to self-storage, in helps to have an expert join you in the variety of meetings you will have in the initial planning stages of your project. These include meetings to select the architect and general contractor. Bringing a self-storage consultant into meeting(s) with the architect before construction begins is important because they can review drafts of plans and make suggestions.
Permitting and zoning is another area where a consultant can help. Reviewing plans before submitting to the city for approval can help you avoid mistakes. An expert self-storage consultant can also work with you to make adjustments if there is any pushback from local governing bodies.
When construction begins, you will meet with architects, builders, and suppliers on a variety of details. Your self-storage consultant can offer valuable suggestions, evaluate products and supplies based on past experience, and troubleshoot problems.
Planning operations before your grand opening is another area in which a consultant can help you avoid problems by implementing best practices from the get go. Office setup, staffing, marketing, and many other operational challenges will be easier to tackle with the input of an expert. In addition, the consultant can help you transition from construction to operations, because they’ve done it many times before.
It is important to develop an effective pricing strategy for lease up. Pricing strategies vary over the lifetime of your facility. When it opens, the objective is to fill the space. Typically your feasibility study will provide input on what you can expect to charge for rent. This is based on a variety of factors, including what your competitors in the market are doing as well as the household income of the people in the area. Your space mix, which determines unit sizes and characteristics, is addressed in the Feasibility Study and finalized in the construction planning stages. Unit size, amenities, and seasonality also impact pricing. Facilities offering climate controlled units and superior security can charge higher prices. Prices also vary with the season. The busier rental seasons of spring and summer have higher prices because of the increased demand.
After lease up, when you reach the breakeven point, pricing strategy typically starts to increase toward the street rate, as opposed to the lower “fill the space” prices of your lease up pricing strategy. When occupancy exceeds ninety percent for a unit type and size, your pricing strategy shifts again, to help you optimize opportunities to increase revenue. An experienced self-storage consultant can help you determine your pricing strategy for different phases of your business, and when to shift from one to another, especially if they know the competition because they studied them in the feasibility study and followed up on research throughout the lifetime of your project.
For more information on what to expect as you enter the self-storage industry for the first time, get the latest eBook from Storelocal® Storage Co-op. At Storelocal we are a group of self-storage owners and operators who work together to increase our competitive advantage in the marketplace.