04 Mar 2021
This story was originally posted on Forbes.com.
Over the years, I've had a hand in developing dozens of real estate properties within the self storage sector from the ground up. I wish I could tell you that all of the deals I've made were winners, but that would be stretching the truth. It would also fail to acknowledge the valuable lessons I've learned along the way.
There are several important learnings that helped shape my approach to real estate development in the self-storage industry. By sharing them my aim is not to completely eliminate missteps along your unique journey — and it shouldn't be yours either. After all, mistakes are how we learn and improve.
Location, location, location. Sure, there's plenty of truth to this old cliche, but it's also an oversimplification.
We developed a self-storage property in a prime vacation destination in South Carolina. The local zoning regulations at the time all but assured us we'd be the only self-storage game in town. It sounded like a home run. But there were two problems.
Despite our location in a prominent tourism hotspot — a place where self-storage should have been in perfect alignment with the needs of the community — we found ourselves struggling to attract the customers we knew were there. Those same zoning regulations that offered exclusivity in the marketplace also forced us to set up shop down an alley behind a grocery store. We were surrounded by potential customers who simply couldn't find us.
The second problem didn't show up until five years after the ink on our deal had dried. In that relatively short amount of time, the attitude surrounding self-storage changed. Before we knew it, the zoning regulations were amended and the floodgates burst open. A dozen competing facilities popped up, positioning themselves between us and our customers. Just like that, we found ourselves with a Class C property on our hands.
I was looking at a property in Chicago, and one of the things I liked about it was the enormous volume of car traffic that could see the store as it drove by on the highway. Even today, there is a core base of people who need to physically see your self-storage facility before they can become customers. So from that perspective, this location seemed to be a sure bet.
In the early days, our approach to selecting which markets to enter wasn't scientific at all. It was more of an emotionally driven decision. If we liked an area for whatever reason, we'd consider putting a facility there. And, it never even occurred to us that we might actually want to have several locations within that same market.
Sometimes the only way to find out what works is to rule out what doesn't. If you look around today, you'll see all kinds of facilities that have been pigeonholed into bad locations.
Through experience, we've learned that it's usually better to pay more for a less-than-ideal building in a prime location than it is to build a sparkling new facility slightly off the beaten path.
We're still learning — as a multinational company, as champions of the self storage industry and as innovators within our category.
Thumbnail: Radius+ Author: Chris Burnam Source: Forbes.com
