What’s old is new again! That’s the idea behind self storage conversions – taking an existing building that was used for some other purpose and transforming it into a self-storage facility. Rather than building a self storage facility from the ground up, conversions have become a popular way for investors to get into the industry. And while there are many benefits to conversions, there are also a few risks. In this blog, we’ll take a look at both pros and cons and highlight the importance of a feasibility study when considering a self storage conversion.
The Popularity of Self Storage Conversions
Why are self storage conversions growing in popularity? Aside from the benefits which we’ll cover shortly, today there are a lot of vacant buildings left behind due to the decline in big-box retail that are ripe for the picking. Shuttered or downsizing retailers such as Kmart, Sears, and Toys “R” Us are now enjoying second lives as self-storage businesses. In fact, it’s not uncommon to see self-storage facilities taking over vacant department stores and anchoring shopping malls. These types of spaces – whether they were electronics stores, retail giants, grocery chains, or even Blockbuster Video stores – often have a warehouse-like interior that is easy to convert to a self-storage facility.
Of course, not retail space is right for conversions. When moving into commercial and residential areas, some municipalities require self storage facilities to “blend in” with the look of the neighborhood. Rather than building a new facility that will stick out like a sore thumb, a conversion can breathe life into old vacant buildings, factories, or churches that already fit in with the look of the area. In older neighborhoods or historic districts, where there may be lots of old-fashioned brickwork, a conversion can really be to an investor’s aesthetic advantage.
7 Pros of Self Storage Conversions
There are a number of benefits to converting an existing building into a self storage facility compared to building a self storage facility. Here are our top seven pros to think about when considering a conversion project.
1. Easier Approvals
Building a self storage facility from the ground up requires a lot of approvals, from the local government to housing associations, or HOAs. However, you may be able to avoid going through the site-plan approval process if you maintain the footprint, access points, and site circulation of the property.
Additionally, the existing building – especially if it has been an empty eyesore for many years – will be devaluing the neighborhood. So, you’ll get less pushback from HOAs and other community leaders if you convert the derelict building into a cool urban storage facility. 2.
2. Greater Visibility
The rising cost of land prices can make it difficult to find an affordable location to build a self storage facility in a fast-growing market. So, you may have to build on the outskirts of town or worse, in the middle of nowhere. That also means spending a lot of money on marketing to make sure people know you’re there.
Conversions allow you to enter an already established area rather than building outside of town. In an established area, you’ll also get more drive-by traffic and walk-ins. So, you may not have to spend too much money on marketing as the facility itself acts as a big visual advertisement.
3. More Storage Offerings
Many vacant retail spaces have large, flat, paved parking lots – much more parking space than most self storage facilities would need. However, all this room allows for drive-up storage. With drive-up storage, tenants can pull their car, van, or truck right up to their storage unit for easy loading and unloading. For this convenience, you can offer drive-up units at a premium following the value pricing model).
These large empty lots can also be used to create outdoor or covered car, RV and boat storage. More than 11 million Americans own an RV and 17 million own recreational boats. Of course, many can’t park their RV or boat in their driveway, making RV and boat storage a great money-making opportunity for self storage owners.
4. Faster Completion
New construction can take a while, but with conversions, you already have the shell of a building. So, there’s no building to erect and typically no site or foundation work. This also tends to make the permitting process simpler; most conversions can be performed using a renovation permit instead of a land disturbance and building permit.
5. Quicker Lender Approval
Because of the faster completion rate for conversions, banks are usually more willing to lend money to borrowers. They understand that the facility will be able to open, enter the market, and break even with less ramp-up time compared to new construction.
6. More Eco-Friendly
Converting an existing structure into something new leaves a much smaller carbon footprint than building a self-storage facility from the ground up. With more and more businesses going green –and more than 90% of consumers saying they’re more likely to trust brands that are environmentally conscious – making less of an impact on the environment is a win-win for your business.
7. Greater Savings
Last but definitely not least, conversions can save you a lot of money compared to new construction. According to Inside Self Storage, typical conversion hard costs currently range from $15 to $20 per square foot compared to $40 per square foot for ground-up development. Of course, this is only true if the conversion doesn’t require too many modifications. Plus, if there are unforeseen issues with a conversion site, money savings may go out the window. That’s while you’ll also see expenses in the “cons of self storage conversions” section below.
7 Cons of Self Storage Conversions
There are a handful of negatives when it comes to conversions. Of course, these will only apply in some cases which is why a feasibility study is such an important part of the conversion process. Here’s a look at seven things to be aware of when considering a conversion project.
1. Building Constraints
When you’re building from the ground up, depending on the site you may have almost unlimited space with which to build and grow. However, when working within a pre-determined shell of a building, you’re typically constrained when it comes to square footage. With predefined column-grid spacing and load-bearing walls, you’ll have higher than normal square-foot loss factors which will limit your self storage architect when it comes to layout.
2. Unknown Building Conditions
When you purchase a building with the intent to convert it, you don’t always know what you’re getting. You’ll want to always conduct a complete building inspection to uncover unknowns. Some of the most common issues that turn up include foundational concerns, roof leaks, defective HVAC systems, and the use of lead asbestos.
3. Zoning Issues
Zoning and permitting can be a problem with new construction, of course, but don’t assume that just because you’re doing a conversion it’ll be approved by the jurisdiction. Many times an investor finds an existing building in an ideal location for a self storage facility, only to learn that the particular commercial zone it’s in doesn’t allow storage.
4. Permitting Issues
Regardless of zoning issues, you’ll likely still need to obtain a conditional-use permit, plus waivers, variances, and an architectural review. If you’re planning an expansion or want to add structures, you’ll be required to do a full site-plan review. At this time, you may be required to do other things to bring the building up to current code, such as following guidelines set by the Americans With Disabilities Act (ADA).
5. Floor Load
If you’re converting a multi-story building, it’s important to check the floor load to ensure it can handle the weight that self-storage items will put on it. Schools, offices, retail space, and other buildings can’t always accommodate this weight, and while the floor load can be enhanced, it can be cost-prohibitive.
6. Limited Access Points
With conversions, your design needs to adapt to the building – not the other way around. This can pose a challenge when it comes to access points, which need to be easy and plentiful to provide a good customer experience. With self storage conversions, the existing building will already have predefined points of access. Unless you plan to relocate access points, which can be difficult and expensive, you’ll be limited to working with existing exterior doors, internal stairwells, and elevator shafts.
On Inside Self Storage’s Self Storage Talk, senior members suggest two things to keep in mind in terms of layout:
- The travel distance for customers from the unloading area to the farthest unit should be less than 175 feet.
- Net rentable space will be about 15-20% less than the overall building due to halls.
We’ve mentioned how conversions can save you money; however, there can be a number of unforeseen expenses as well. On his self storage podcast, AJ Osborne, CEO of Cedar Creek Wealth, highlights the top four expenses you may encounter.
- Roofing. AJ notes that almost all conversions require some roofing work (if you’re lucky, the building may just need some patchwork). He points out that a recent Super K-Mart conversion cost more than $800K in roof work and an office building conversion cost more than $1M in roof work.
- Gutting. Demolishing portions of the interior (removing walls, etc.) to improve the flow of the facility can get pretty pricey.
- Access points. If you decide to create more entry and exit doors, AJ notes that it can come with a hefty price tag. Additionally, you’ll need to consider creating in and out lanes and installing fencing and gates.
- HVAC. Another issue may be the existing HVAC system. It may not be functional or may not be appropriate for a self storage facility. Repair or replacement can get costly.
Consulting for Self Storage Conversions
Self storage conversions can be a great way of entering the self storage industry or expanding your footprint within the industry. Just like new builds, however, it’s important to do your due diligence.
Storelocal Consulting can help you determine which vacant building is in a good location for your investment property through a feasibility study, determining viability based on size and location, local research using a market demand study, industry standards, and trends, and more. We'll also help you with architect and builder recommendations, identifying the right unit mix, office setup, and more. Of course, you’ll need to be a member of the co-operative first, so consider joining today!