Pick A Plot: Choosing The Right Development Site

Everyone knows it: Investing in real estate tends to be a good financial decision. The operative word being tends. There are many variables that have an impact on how profitable a project could be, and self-storage is no exception. So, before you start developing a portfolio, take a step back for some thorough prep work. 

It would also serve you well to have a lot of patience and sense of humor, since, depending on the location you have your sights set on, city planners could take you on a wild joy ride with interesting requests. By the same token, it’s almost guaranteed that some unexpected issues will pop up, so plan accordingly and have extra cash reserves on hand. 

It’s also important to keep in mind that even when you know what to do and how to do it, you’re only one piece of the puzzle in any development project. However, when everyone communicates early, regularly, and clearly, it can all move forward like a well-oiled machine. Then you can celebrate and laugh all the way to the bank. 

Background Research 

“The first thing to do is to identify a market that has potential and has the need for self-storage,” says David Meinecke, vice president of business development at Jordan Architects, a full-service design firm in San Clemente, Calif. “It’s nice to have a commercial zone with a good street presence. Although a lot of tenant traffic is driven by the internet, there are still a lot of people who find out about self-storage facilities by driving by.” 

Eric Blum, president of BMSGRP Self-Storage Consulting, a company that provides services on development projects nationwide, agrees. “You have to consider what is going on in the area in regard to existing housing and retail development,” he says. “Is the site zoned for storage? And if it’s not, you’ll want to find out ahead of time if the city would be willing to support the change of zoning. Do they want storage?” 

If they do want storage in the area, it’s also essential to delve deeper into what kind of product that particular market needs. “Market research aids in understanding consumer preferences,” says Cecelia Parra, vice president of development at The Parham Group’s Noah’s Ark Development, which specializes in consulting services for self-storage land acquisition and investor opportunities. “These can include unit sizes, facility features, and pricing, which are key to attracting customers. Paying attention to all of these details ensures that you’re optimizing your investment and increases the likelihood of long-term success.” 

Put together, it may all seem like a tall order, but crossing all the Ts and dotting all the Is will save you a lot of money and discord in the long run. 

Business Intelligence Tools 

Thankfully, we’re well past the days when you used to have to look up numbers in the Yellow Pages to get information on a site. Excel spreadsheets can also be left in the past. Today, you can evaluate potential self-storage investments by utilizing software that gathers data you can use to prepare market reports and feasibility studies. “Radius+ is good to evaluate the market and surrounding competition,” states Meinecke, who also uses CCMI technology to investigate the demographics of a geographical location. 

Blum also likes Radius+, as well as Stortrack, and recommends TractIQ to start your search and locate potential areas. 

When conducting your research, you’ll also want to evaluate rental rates in that specific market, as well as the population growth trends and the existing self-storage competition. And when assessing the surrounding population, Meinecke also advises to record their income and the square feet per capita. A denser population with a good income is desirable; and you'll want to compare the square feet per capita vis-à-vis with the national and state averages. He also suggests going the extra step to determine what’s in the development pipeline. “This will have a definite impact on lease-ups,” he says. 

On her part, Parra shares a wealth of insights about what different business intelligence platforms have to offer. “We use Track IQ, Regis Sites USA, and CoStar to narrow down ideal locations for self-storage investments. Track IQ offers over 200 datasets into consumer behavior and storage utilization trends, while Regis Sites USA is a mapping software providing demographic key data; and CoStar delivers detailed real estate market intelligence, including property data values and competitive landscapes. Together, these platforms enable us to make informed decisions by identifying high-potential markets and mitigating investment risks.” 

She also recommends taking into account data points such as population density, age, and income levels to fully understand your target market. You’ll also want to look at traffic patterns to gauge accessibility and visibility, as well as growth trends, such as residential or commercial development, which can drive future demand. 

Finally, she also advises to examine additional market demand indicators when you’re scoping out the local competition: What’s the occupancy rate? What are the rental trends in the area? “Together, all of these factors will provide a comprehensive framework for selecting an optimal site,” Parra says. 

Artificial intelligence can also play a useful role in this step of the process. If you’re an investor seeking to work with privately held companies, you can enter the information from Offering Memorandums (OMs) or Private Placement Memorandums (PPMs) into commercial real estate underwriting platforms such as Cactus AI. You can then use its features to create models on how fast you can establish rates. This can help you streamline your decisions. 

Before you get too excited thinking that you can delegate this portion to machines, think again. “AI can be an excellent tool to speed things up, but it’s not infallible and should never be the final step,” says James McLean, head of business development at Radius+. Once all the information has been extracted, review it carefully to see if anything needs to be updated or adjusted. And before deciding on which platforms to use, make sure you compare interfaces and features, as well as how quickly their customer service reps can get back to you. After all, software is only useful if you can learn how to use it properly—and when their personnel are easily accessible to help you and your team as you navigate the inevitable learning curve.  

Common Challenges  

Once you know where you’d like to build, you then must take into account the idiosyncrasies of the jurisdiction you’ll be working in. “Los Angeles is a prime example of a difficult location,” Meinecke says. “And their parking requirements are insane. They forced us to put in a high number of parking spaces for bikes, and they required a large percentage of the parking spaces to be set aside for electric vehicles.” He advises enlisting experienced entitlement experts to work in your project, since they can get creative to get around such demands. For example, they’ll know of lesser-known exceptions to parking requirements, such as if the facility is being built within half a mile of mass transit. 

Hiccups like these, as well as failing to have experts who know how to handle them, will have an impact on a project’s timeline. Therefore, you don’t want just any experienced entitlement expert. You want one who’s specifically well-versed with working in the jurisdiction where you’re developing your project. You also want to work with seasoned developers, since they’ll usually have a good idea of what it’s going to take to build in a specific area cost-wise. 

Other experts to have on your team include structural, mechanical, plumbing, and dry utility consultants. “This is something that is typically overlooked in project management,” states Meinecke, “having consultant coordination and making sure there’s a complete team involved.” 

Knowing all the insights these professionals bring to the table prior to starting your project is crucial to set a realistic budget. “Things can get complex because you’re trying to keep costs down, but depending on the jurisdiction you’re working on, costs can keep going up,” says Meinecke. “If your project is located in a commercial area, they typically will want the facilities to look upscale and not like traditional storage. This can also be an issue in industrial areas.” 

One way to make sure you’re enlisting a stellar team is to work with companies that have experience working specifically on self-storage projects. “This will make the process infinitely easier,” states Blum. 

Keep In Mind 

Now you know what to look for when conducting market research, as well as which SaaS platforms can provide you with the features you need. While that may feel like a marathon, it’s just the equivalent of toeing that start line. 

As part of any complex projects, plan for the unexpected. Even when you get all your ducks in a row, there will likely be surprises and hurdles along the way. Knowing what some of these may entail, and how to get around them, will help things run along as smoothly as possible. 

Bureaucracy

Another reason to round up experts in self-storage and in your desired jurisdiction is because, in addition to knowing the nuances required by local regulations, they also know what the city is seeking and how long it typically takes to review and approve plans. “If the city is behind, it could take three months just to get plan reviews back,” warns Blum. “Knowing what the city will allow you to build, working with the city planner and manager can save time and money.” 

Frequent Communications

Parra states that optimal construction planning management requires a thorough project timeline and budget considerations, yet even seasoned industry veterans could easily overlook steps such as soil and environmental assessments, which can prevent costly delays. “You’ll also want to engage with local governing jurisdictions early to address potential concerns,” she says. “And you’ll want to maintain clear communication with contractors, suppliers, and project managers. Doing so regularly is frequently underestimated, yet it’s critical to ensure the project stays on track and meets quality standards.” 

Discretionary Permits

If a particular geographical location isn’t zoned for self-storage, it’s not the end of the world. You may be able to get around it by requesting discretionary permits, such as variances or special-use permits. The requirements will vary from jurisdiction to jurisdiction, and they take into account project impacts, such as effects on the surrounding neighborhood as well as environmental concerns. You’ll also want to keep in mind that some permits may be revoked if certain conditions aren’t met, such as allowable square footage or restricting certain activities in the facilities. According to Parra, these issues can be resolved by engaging local officials early, presenting them with thorough impact studies showing compatibility with current and future land use plans, and fostering community support. 

Unforeseen circumstances

Sometimes, even if you’ve been around the block many times, life can throw you a curveball. Knowing this, it’s sometimes wise to build some wiggle room into your timelines, if possible. “I’ve seen projects where construction has been delayed due to weather or supply chain disruptions,” says Parra. “These have been managed efficiently by building in contingency periods, pre-purchasing materials when feasible, and maintaining close coordination with contractors and suppliers to ensure a timely completion.” 

Managing Expectations

If you’re in the business of consulting, start each project by going through the rough site plans with the jurisdiction. “This will give you a good idea of what the city will demand, what you may be able to get away with,” says Meinecke. “That gives the client an indicator of what those demands will be, right from the start.” All things considered, people are much more likely to stay in a good mood if they already know what to expect going in. 

While the list is long, and there are things that you can only learn through experience, heeding advice and using the right technologies can make the process run significantly more efficiently and ensure that you end up making sound investments. Once you start seeing that bottom line grow, you’ll want to do it over and over again. 

On the other hand, failing to do your due diligence could result in throwing cash into a money pit. So be meticulous with your planning, don’t skip steps, and ask for help when in doubt. There are plenty of self-storage consultants who are willing and able to offer guidance. And Messenger is always here to be a resource to get you on the right path. Good luck, Godspeed, and make it rain! 

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Alejandra Zilak studied journalism, went to law school, and now writes for a living. She also loves dogs. 

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