Friday, May 29, 2020
Self Storage Q7 Overbuilt / Saturated
So a common question I get from multi-family investors is, you know, they feel that self storage is saturated or overbuilt. And I understand where they're coming from with this question. My name is Fernando Angelucci. I'm "The Storage Stud".
Usually the reason I get this question, is because the way that multi-family or single family is measured when it comes to saturation and demand is not similar at all to how self storage is. Self storage is a hyper localized business. Whereas multi-family and single family is a more broader business. So what do I mean by that? Say you lived on the North side of Chicago and you were looking for a new apartment. You're most likely going to look across most of Chicago to find that similar property. When it comes to self storage though, as opposed to looking 15, 20, 25 miles in diameter. With storage, you're looking at a very localized market, a very small trade area. Typically in a large city, your trade area is going to be defined as about a one mile radius from your subject property.
So let's break this down a little bit. When you look at the typical customer of a self storage facility, they're looking for something that is convenient, that is usually on their transportation route, either going to work or going to daycare so they can stop in and out quickly. And it's not going to cause too much of a headache. Someone is not going to go an extra 15 miles out of their way to save an extra five bucks a month. So when people say, you know, or ask, is storage saturated? What my usual question is, what location? What sub-market? Is it this one, three mile radius in the suburbs that is saturated? Is it this one mile radius in the downtown urban area that is saturated? So you can't throw these blanket questions and blanket statements out there, especially for self storage because it's such a hyper localized business.
Again, my name is Fernando Angelucci. If you'd like to learn more about storage, feel free to drop me a line at www.TheStorageStud.com