10 Dec 2024
Self-storage facilities can be incredibly lucrative investments, but success requires more than just putting up some walls and unlocking doors. Many facilities face financial trouble due to a few key missteps. Here’s a fun, informative look at the top seven reasons self-storage developments fail, with stats to support each claim—and how you can dodge these common pitfalls.
### 1. Skipping the Market Research Step
Building without understanding the local market is like fishing without knowing if there are any fish in the lake. Many owners assume every town has room for more storage, but in saturated markets, up to 30% of facilities report occupancy rates below 70%. Without demand, even the fanciest facility can struggle.
Pro Tip: Research is everything! Look into population trends, competitors, and unit demand. If the market’s already oversaturated, or if the population can’t support the supply, it’s better to find another location.
Offering rock-bottom prices to fill units quickly might seem like a smart move, but it often backfires. Data shows that facilities with frequent discounts report 15-20% higher tenant turnover. Constantly discounting can cheapen your facility’s image, attract short-term renters, and make profitability tough to maintain.
Pro Tip: Set your prices based on the quality and convenience your facility offers, not just to beat the competition. Potential customers are often willing to pay more for a clean, secure, well-maintained facility with great service.
Even the best-looking, best-managed storage facility will struggle if it’s inconveniently located. Up to 2 out of 3 self-storage customers report choosing a facility based on convenience and accessibility. You might find a steal on land, but if customers can’t easily reach the facility, it’s going to hurt your business in the long run.
Pro Tip: Prioritize locations that are easy to find and accessible from major roads. It should be a convenient stop, not a detour, for customers.
We live in a digital-first world, and over 6 out of 10 self-storage customers start their search online. Facilities that fail to build a digital presence and rank well in search results miss out on a huge source of new tenants.
Pro Tip: Invest in a solid website, local SEO, and digital ads, so people can actually find you online. Encourage happy customers to leave reviews on Google and Yelp—it’ll boost credibility and visibility.
Owning a storage facility isn’t a “set it and forget it” business. Utilities, insurance, maintenance, security, and other operational costs can quickly add up. About half of new self-storage businesses report significant financial strain due to underestimated operational expenses, leading to cutbacks in essential services.
Pro Tip: Create a thorough operating budget that includes room for unexpected expenses, like repairs or equipment upgrades. Keeping up with maintenance and security is crucial—not just for appearance but for attracting long-term tenants.
It takes time for a new facility to reach full occupancy, and without adequate cash reserves, this ramp-up period can be financially stressful. Up to 40% of new self-storage facilities report that they need at least 12-24 months to reach stable occupancy, and running out of cash during this period can be disastrous.
Pro Tip: Budget for at least 12-18 months of carrying costs, including loan payments, utilities, and marketing expenses. Be prepared for a gradual increase in occupancy—this planning can make or break your early operations.
A great facility in the perfect location with a solid customer base can still fail if it’s poorly managed. Facilities with well-trained, experienced managers report 30% higher occupancy rates and greater customer satisfaction. Hiring an inexperienced manager or lacking a clear management strategy can lead to customer service issues, inefficient operations, and lost business.
Pro Tip: Look for managers with experience in self-storage or a related industry, and set clear expectations for customer service and day-to-day operations. If hiring a manager isn’t feasible, consider professional third-party management with a strong track record.
Navigating the self-storage business requires market savvy, sound budgeting, effective management, and a strong online presence. Avoiding these seven common missteps, supported by statistics, can help keep your facility thriving. With a smart, strategic approach, you’ll avoid the dreaded “For Sale” sign and pave the way to a profitable, successful self-storage business!
At Storage Authority Franchise we are a leading provider of comprehensive solutions for self-storage development and operations. With a focus on excellence and profitability, we empower franchise owners to achieve elite status in the industry as an alternative to consultants and 3rd party management. Our proven systems, expert guidance, and unrivaled support help self-storage facilities thrive and surpass all expectations. If you are thinking about self-storage you owe it to yourself to contact Kevin Harless at Kevin@storageauthority.com to learn more about the Storage Authority Franchise opportunity.
