If you’re planning to build a self-storage facility, you want to ensure it’ll be a success. Performing a feasibility study will help lenders determine whether your self-storage project is worth pursuing. What’s more, some lenders require a feasibility study before they’ll extend a loan.
A feasibility study evaluates whether your self-storage project will generate enough revenue to create a profit after you’ve paid your operating expenses and debt. A good study gives you a clear understanding of your project’s potential risks and rewards.
How to Perform a Self-Storage Feasibility Study
Conducting a self-storage feasibility study involves:
- Establishing a trade area: The trade area is the geographic radius in which most of your facility’s customers reside. This area may be as small as a mile in dense city areas or as large as 5 miles in suburban areas.
- Gathering competition data: Compile information about competitors in your trade area, including the number of units and their occupancy rates.
- Determining supply: Use your competitors’ square footage and occupancy rates to assess the current market supply. Generally speaking, an over-supplied market has occupancy rates of less than 80% and an undersupplied market has rates of over 90%.
- Evaluating demand: Look at factors like the current population, the number of renters and the average household size in your trade area to determine the level of demand.
What to Look for in a Self-Storage Feasibility Study
Some of the most important factors in a self-storage feasibility study include:
- Your competition: It’s essential to know what self-storage options are available in your area. The feasibility should contain details like location, unit sizes, occupancy, age of existing facilities and any self-storage projects under construction.
- Demographics: The study should help you understand your customer base. Knowing key information like average household income allows you to determine what features customers want and can afford.
- Unit type and size: Your study should address the unit type and size the market prefers. For example, some markets may prefer more large commercial units than residential units or vice versa.
- Trade area geography: Accessibility is crucial to your facility. Your study should address any physical obstacles customers may face trying to access your facility, such as traffic patterns, airports and rivers.
Contact Investment Real Estate, LLC for a Feasibility Study
Leave your feasibility study to the self-storage real estate experts at IRE. Owners, management firms and lenders highly value our feasibility studies. Reach out to us today to request more information!