Editor’s note: This post was originally published in August 2013 and has been completely revamped and updated for accuracy and comprehensiveness.
It happens to me all the time: I’m stuck at a red light in the suburbs and waiting impatiently for traffic to clear. I look around the street and see an old, empty shopping mall, a Sears store that closed years ago, or a going-out-of-business Best Buy with a sprawling parking lot. Now that I work in self storage, I can’t help but imagine the wasted space repurposed as storage space. I visualize the aisles that used to showcase vacuums as climate controlled 5x10s, a wine storage space in the basement that was previously used for back stock of Whirlpool washers and dryers, RV and boat parking in the asphalt parking lot where customers used to line up at the crack of dawn for black Friday sales, and rentable office space on the second floor that used to be women’s wear.
With the rising popularity of online retail, malls and traditional big box stores are closing left and right and going empty. As a self storage investor, you’re in the perfect position to take these antiquated structures and turn them into money-makers again. Check out this blog post to find out more about this industry trend and where to start before your first conversion project.
Building conversions are increasingly popular options for expansion in the self storage and mini storage industry - and for good reason! The high traffic areas and dense populations found around big-box retailers are great for storage, and even a bad building in a great location could be a wise investment. These types of spaces (whether they were electronics stores, general retail giants, grocery chains, or even video rental locations) usually have a warehouse-like interior that is easy to convert to class-A climate controlled self storage with a few building improvements and a little elbow grease. There are tons of reasons why more and more storage investors are opting to renovate rather than build, but here are a few potential pros for your next project:
You’ll be in an established community. With the rising cost of land prices, it’s tough to find an affordable location for a new self storage build in a fast-growing market. With a conversion, you’ll be able to offer self storage in a convenient, established area rather than building way out on the edge of town or outermost suburbs.
You’ll do the neighborhood a favor. Rundown, empty retail space is an eyesore, and by flipping the property and turning it into self storage, you’ll brighten the space and have a positive impact on the community. Local residents will appreciate your efforts to improve the community, giving you some good juju with potential renters.
You’ll save a lot of money. Last but definitely not least, conversions save investors big bucks. Many storage facility owners have reporting savings of over 30% on converting existing warehouses or empty buildings to storage compared to what it would have cost them to build everything from the ground up.
Many of these existing properties have a large, flat, and paved parking lot – with much more space than is required for a storage facility. Giant parking lots are a great opportunity for further development of traditional, drive-up storage, outdoor or covered RV, car, and boat parking, or rentable space for other businesses. Since most building conversions don’t allow for rows of outdoor units with drive-up access, you’ll need to carefully plan your parking and loading options.
Remember: one of the biggest challenges of conversions is making your space eye-catching while not obscuring the building’s purpose. People recognize storage facilities because they generally follow a similar layout and aesthetic. Don’t miss an opportunity to make clever architecture work for your business!
Starting a conversion project is not terribly different than starting a new build project: you’ll need to do a market feasibility study of the area, get advice from other storage owners, develop a strong business plan, and meet with investors and lenders. To avoid common conversion pitfalls, start with these steps and surround yourself with a team of experts:
Find potential warehouse space in your market. Renovating old warehouse space isn’t new, but as cities grow more and more dense, it’s certainly more popular than it used to be. If you’re in a hot metro market, you’ll need to be on top of things and use your eye for prime real estate to find a deal on a ready-to-renovate warehouse or retail building.
Talk to other owners who’ve successfully converted buildings into storage. This is a crucial step: who would know better about the challenges and success of converting buildings into self storage than people who’ve been through it themselves? Check out discussion forums, go to self storage trade show, or ask your technology provider to connect you with other owners and developers who have experience in conversions.
Get with an architect and a contractor to inspect the property thoroughly. Even if you’ve flipped a dozen self storage properties, you’ll want to get the help of an expert or two to assess the structural integrity of the space and determine essential repairs to safely convert the warehouse or building into self storage. Check out this article from Janus to read a builder’s perspective versus an architect’s perspective of converting a building into self storage.
Price it out. After you’ve walked through the property with your contractor and architect and determined major updates, demolition, repairs, and more, you’ll need to calculate the cash flow of everything involved in the conversion project. One of the best resources for evaluating the financial feasibility of a conversion is this calculator from Trachte.
When considering a site for construction, it is important to consider how much repairs and construction of units would cost. You should pay extra attention to max foundation loads and roof integrity, as some foundations are not built to handle the weight per square foot that storage units can have, and tenants and operators alike hate leaking roofs. It’s also important to take note of existing HVAC systems to see if they can be utilized in your storage units - some big box retailers have well cared for HVAC systems that may work for your storage project. Before becoming too involved in the process, make sure to check local zoning regulation, and if the area is not zoned to allow storage, ask a city official if it would be possible to rezone the building. Oftentimes the city will be so happy to eliminate the vacant storefront and revitalize the space that they’ll be much more likely to allow changes to zoning code.
In the end it all comes down to your goals in self storage. Does the decision to repurpose an old grocery store into a mini-storage facility make sense for your business plan? Above all, wait for the right price and find a building that works for your goals. And next time you drive by an old, dilapidated shopping mall, swing the car around and give it a looksee with self storage in mind. You never know - it just might be your next lucrative storage project!
Thanks for reading! If you liked this blog post, you may also like: Interview: Talking tech and self storage buildings with Janus International Group, Client Spotlight: Extra Self Storage, and Top 7 facts about building a self storage facility.