Making the Right Choices

By Mike Parham

Our lives come with choices. From the moment our eyes greet a new day until they close for much-needed rest, our days are filled with the mental act of making choices. Whether the decision is as simple as “What should I wear to today?” or as complex as “How should I invest my money?” making the right choice is crucial. Why? Because more often than not our wrong choices bring unwanted circumstances that leave us with even more difficult and complicated decisions to be made. The self-storage business is no different. Wrong choices in today’s economic environment could lead to a financial disaster. Most disasters that are products of poor choices can be avoided if one is aware of the three most common mistakes made by a new self-storage developer.

Mistake #1: Making hasty choices without gathering all of the facts.
A Supply and Demand Analysis is the key element needed to make the correct “go” or “no-go” choice. When properly completed, it will have determined if a particular market has an adequate amount of net demand to ensure the success of a new self-storage venture. In addition, a Supply and Demand Analysis will provide an excellent representation of the market’s present occupancy and the remaining square footage within the market that is not leased. By knowing the unleased space available, market demand projections can be made as to how soon your new facility will lease-up without affecting the property’s leasing and stabilization projections.

Mistake #2: Making choices without complete knowledge of the market.
Know the answers to these questions: Are rents high enough to justify going forward with this project? What are my competitors’ strengths and weaknesses? Can another competitor build on top of me? Although the answers are vital to the success of your self-storage venture, these questions only scratch the surface of the information needed to make critical decisions. Additional research will be required to determine jurisdictional restrictions and entitlement requirements, zoning dictates and building code issues, set-backs, parking requisites, landscaping requirements, utility availability, drainage and water-retention concerns, environmental issues, title policy issues, civil engineering issues, and the list continues. No valid decisions can be made without all of the facts. In other words, you must know everything that there is to know about the market!

Mistake #3: Not asking for help.
Our industry is saturated with a host of qualified consultants who are, or have been, successful self-storage developers. These men and women have blazed the trail before you. They have paid for their mistakes, and they have learned from them. They know their customers. Many have such a complete knowledge of the industry that they can deduce the unit size and duration of a lease as a customer walks through the door! Their treasury of knowledge is essential to every self-storage developer’s success, and the decision to use their knowledge could be the deciding factor in your own success. However, I would like to give you a word of caution: Make certain that the consultant you select is truly qualified. Has he or she developed and operated multiple facilities in a variety of markets across the country? Be wary of what you hear from a salesman on a self-storage trade show floor. Consider and research the source before making final choices and decisions!

In summary, the self-storage industry has been, and will continue to be, a thriving retail business. However, just as in any new, high-growth industry, it’s currently suffering some “growing pains.” The “aching pain” today is a symptom of overbuilt markets — a direct result of uninformed developers failing to conduct comprehensive market research. When a market is overbuilt, years of high population growth are required to absorb excess self-storage demand and to allow rents to be brought to the pre-saturation levels. If this concerns you, then this alone should be your motivation to avoid the repetition of the previously mentioned most common mistakes! Study facts that you’ve gathered; make an informed choice. The best recommendation that I can now make is this: Any choice you make to go forward with a new self-storage development should at the least be given the same attention and research as you would give a personal life-changing decision. Why? Because the choices you make for both have the same importance: life changing success or failure. My best to your success!

Mike Parham is founder and president of Noah’s Ark Development and the developer and general partner for the Noah’s Ark Self Storage chain. The Parham Group allies Maverick Investments, Noah’s Ark Development, NDS Construction, Cross Metal Buildings, and Joshua Management.