In 1964, Russ Williams and his stepson Bob Munn built the first self-storage facility with garage-style doors in Odessa, Texas. Over the years, self-storage facilities have cropped up all over the nation. As Americans increase spending, we need spaces to store our “stuff.” That’s why the storage unit industry is thriving.
- Adequate Population and Income to Support the Facility
- The Present Condition of the Storage Unit Facility
- Mobile Technology is the Future in Storage Units
- Competition and Barriers to Entry for Storage Competitors
- Don’t Overlook the Texas Climate-Controlled Storage Buildings
- Make a Solid Investment in Texas Self-Storage
Currently, self-storage is a multi-billion dollar industry, bringing in $39.5 billion in annual revenue last year alone. Almost 10 percent of all American households rents a self-storage unit and spends an average of $88.85 per month to store their belongings.
As of last year, the United States had about 1.7 billion square feet of storage space in about 50,000 storage facilities. To put that number in perspective, self-storage developments outnumber both U.S. McDonald’s restaurants (over 14,000) and Starbucks locations (around 12,000) combined.
Nationwide, storage units typically see a 92% occupancy rate. But those statistics differ based on geographic location and other factors.
For investors, these commercial real estate developments can be money-making properties. Or they can be money pits. To help you make a wise choice when purchasing a storage unit development in Texas, here are some things you need to know.
Adequate Population and Income to Support the Facility
A successful self-storage business needs a good location and a demand for storage units. Self-storage investment expert Frank Rolfe has been investing in self-storage for almost 20 years without a failed property. He outlines some keys to location and demand based on his experience:
- Population density — Without people, there is no demand for storage. A successful storage unit facility should have 50,000 people within three miles of the facility. Rolfe says that buying a self-storage facility in a small town probably won’t be successful enough to be profitable. The more densely populated an area, the more lucrative a storage unit facility will be.
- Traffic count — Rolfe says that most customers discover a storage facility simply by driving past the location. The facility you purchase should have a traffic count of 25,000+ cars per day to maximize visibility and reach.
- Median household income — People who can afford to spend $100 per month (or more) on a self-storage unit usually have a discretionary spending ability. They also have excess belongings. In order to find these people, Rolfe says the median household income should be at least $50,000 in the area surrounding the facility.
The Present Condition of the Storage Unit Facility
Whenever you purchase a used property, be it office space or storage units, you can expect renovation costs to get it in tip-top shape. Even though most commercial real estate buyers budget for upgrades, a neglected self-storage facility might need more than a few quick-fixes.
Broken doors, broken fences, an outdated office, a sub-par security system, or a lacking lighting system can all add to the total price of the facility and eat into your budget. When considering Texas storage unit facilities to purchase, look beyond the listing price to the overall condition. The better the condition of the property, the less you’ll have to invest in renovations and repairs, and the faster you’ll turn a significant profit.
Mobile Technology is the Future in Storage Units
A decade ago, having a decent website was good enough for a business to thrive. Today, mobile technologies have drastically altered the way commercial real estate operates. The self-storage industry is no exception. Many customers want to search for, reserve, and pay for a storage unit from their phone or other handheld devices.
Without reliable, user-friendly technologies in place, a self-storage facility will lose customers. If you purchase a storage unit facility in Texas or elsewhere, it should have the latest customer-facing technologies in place. If the storage unit facility lacks this technology, research the cost to update this technology before investing.
Competition and Barriers to Entry for Storage Competitors
As you investigate which storage unit facility to purchase, be sure to examine the local competition. Know the number of nearby storage facilities, the number of units in each, and if there is a capacity for new storage facilities in the area.
Rolfe advises purchasers to “select a market that allows virtually no further construction of self-storage facilities. Otherwise, you may find that the occupancy can never rise above a certain level since there is always more supply being brought on the market.”
Don’t Overlook the Texas Climate-Controlled Storage Buildings
Much of Texas has a sub-tropical climate, leading to mild winters, but hot, humid summers. Heat and humidity are two things that can damage furniture, clothing, keepsakes, and other valuable items in storage units. Therefore, many customers are more likely to consider climate-controlled storage facilities over the competition.
Since Texas summers are so hot and humid, investors should consider purchasing facilities with at least some climate-controlled storage units. This assures your customers’ belongings stay in top shape while in storage during the subtropical Texas summers. Customers pay upwards of 50% more in monthly rent for climate-controlled storage units, so investing in this feature is a smart choice.
Make a Solid Investment in Texas Self-Storage
To many historians, Texas is the home of modern self-storage. Throughout the Lone Star State, there are opportunities for commercial real estate investors to buy Texas storage unit facilities. If you are considering investing in a Texas storage unit development, know what you are getting into before you buy.
There are multiple ways to invest in a storage unit facility. While some investors have the capital to purchase a facility outright, others find different avenues. REITs are one easy way to get started in commercial real estate, specifically storage unit facility ownership.
Choosing the right property in the right location can provide long-term profitability. Alternatively, choosing the wrong property can drain your profits.
If you want to learn more about your commercial real estate investment options, contact one of our CRE pros today. We would be happy to talk about self-storage unit investments and how they can bolster your investment portfolio.