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Starting A Self Storage Business: What You Need To Know

The self-storage industry in the US has experienced a boom in recent years.

Typically considered a not-so-enticing industry, with buildings relegated to locations that aren't deemed good enough for other uses, the self-storage sector is no longer hiding in the shadows—far from it.

In 2023, the US self-storage industry stood at $29.5 billion, with a projected CAGR of 1.86% between 2024 and 2032. If you're looking for a market to break into and are looking for a new profitable venture, then self-storage could be the right avenue for you to explore now.

Key Takeaways

  • The self-storage industry has grown significantly, making it a viable business opportunity.
  • Profitability depends on multiple factors including facility size, demand, unit number, and contract duration.
  • Understanding the local demand is crucial, with an 8 sq ft/person in a 3-mile radius as a general guideline.
  • Identifying target customers, such as Gen X, baby boomers, or students, helps in customizing services.
  • The type and size of storage units offered can significantly affect profitability.
  • Choosing the right location with good transport links and accessibility is key to success.
  • Being aware of and complying with state laws and regulations is essential for operating a self-storage business.
  • Consideration should be given to building a new facility or buying and retrofitting an existing one.

How Profitable is Self Storage?

Much like anything, the profitability of a new business depends on multiple factors, including the size of your facility, demand in the area, the number of individual units you have, the duration or storage contracts you offer, and so on. However, figures suggest that, on average, self-storage owners can have an annual income of $184,500 for a 5,000-square-foot facility. In contrast, other reports indicate the income can be from $300,000 to $800,000 if done correctly.

That being said, the factors mentioned above can influence your earning potential. Much like any new business, there are some important considerations before jumping feet first and trying to become a self-storage tycoon.

Demand

In the first instance, you need to determine if there is any demand in your area or in the area where you are located. Not all areas will have increased demand for self-storage. Gen X is typically more likely to use self-storage services than other generations, so finding an area populated with this generation can be a good idea. However, they are not the only ones requiring off-site storage, and there will likely be demand from various sectors and demographics.

This is where doing your research will come in handy. A good rule of thumb is 8 sq ft/person in a 3-mile radius. If you exceed this, you won't be meeting demand, and it's best to avoid it and look elsewhere.

An excellent way to determine the demand for self-storage in an area is to look at competitors in the area and check out their capacity, whether they're empty, what they charge, etc. If there are many options for people looking for storage, this can indicate a high demand, especially if these current options are full. Or it can suggest that maybe you need to move further afield and find a new location.

Target Customer

Moving on from the above point, finding your target audience can help you understand the type of demand and what type of storage facility you need to set up. As mentioned, Gen X is more likely to utilize storage options. However, the Baby Boomer market accounts for 21% of the population, and as they age, they are more likely to downsize, meaning they, too, could be in need of self-storage in their local area when the time comes.

That being said, one such market that is often forgotten is the student market. Students who move into dorms often have limited space, and having off-site storage local to their place of study can allow them a place to house their belongings that they want to keep on them but can't hold onto in their dorm. They can also utilize storage between semesters or when transitioning between accommodations during summer break.

Other target audiences could include military personnel, other businesses, or those relocating. You can target one group or all of the above, or you can enter another market to help make your new storage business more lucrative.

Type of Storage

The type of storage you offer can dictate its profitability and how much you can charge or reasonably expect to make.

The three most popular sizes of storage units are 10×10, 10×15, and 10×20. However, these aren't the only dimensions you can offer. You can stick to one size for all units, have various sizes, or even offer storage options for vehicles such as RVs, trucks, sports cars, boats, etc., or offer smaller units for those who only want to store valuables, for example.

Once you know what size units you want, what is in demand, and the customer you are targeting, you can work with a contractor to build your facility or renovate an existing building. Working with an experienced self-storage contractor using structural steel options for your build retrofit will give you the best result in designing your facility and one-up options for you based on the size of the building you are constricting or retrofitting.

Location

The location of your storage facility can influence its profitability. You need good transport links, easy access, and allowing users to come and go when required. If you allow 24/7 access, there needs to be no traffic limits after certain hours, or you need to be close to the target population so they don't have to travel too far.

So, while demand will often dictate your geographical area, the base you choose for your facility must be accessible to the market you are targeting.

Laws

Before moving ahead, you need to be aware of any laws governing the state or states in which you plan to operate your storage business. Firstly, you need to check if there is a zoning restriction for operating in the location you have chosen for your facility. From here, you need to be aware of the laws governing self-storage owners regarding contracts and restrictions of use. Each state will have its own laws that you need to abide by, so make sure you're aware.

As standard, the following laws can generally be expected;

  • No living in storage units
  • No pets
  • No flammable goods
  • Give notice or wait a set number of days before putting a lien on the unit in the event of nonpayment.

From here, you can typically implement your own rules and regulations for the safety of staff and users in the building. For example, you can have a no-firearms rule and no-food rule. But make sure you're aware of your rights and those of the US so you can draw up effective contracts and not break any laws.

Building New Or Buying A Business

You don't always need to build your new storage unit from the ground up. It can also be worth considering buying an established business and retrofitting or updating it. This option can often be easier and cheaper as you don't need to start from nothing. Often, you can collect rent on units while doing any remedial work required. Plus, you'll also have an established customer base and name it build form.

Alternatively, if you want to put your own stamp on your business, you might prefer to build new. This way, you can be sure that everything is exactly how you want it, and you don't have to make major changes to the building to get what you want or need from it.

Finances

Again, like with any business, there are going to be upfront costs, and due to the nature of a self-storage facility, the cost can be a lot more extensive than other options. The average cost of starting a self-storage business is around $2 million. These costs include construction, land purchase, permits and registrations, and outfitting.

These costs can fluctuate depending on the type of facility you're building, whether you're designing a multi-story unit, the location, supplies, labor, etc.

You need to be confident that you can afford the expenses, repayments, permits, etc., to keep operating for at least six months or one year. Growing a business and success isn't guaranteed, and being able to afford the ongoing costs before investing in this operation is vital to ensuring that you sustain the company until you're turning a profit.

If you choose to buy an established business, costs will typically be lower depending on the price you pay for the business and whether or not you need to do any work or make changes to the existing structure. But in either scenario, you need to be able to have the finances to bankroll building your new storage business and get it up and running.

Marketing

Last but not least, you need to be able to market your new business to your desired audience and customers. A marketing budget and campaign are essential for any business, and in the run-up to opening day, you need to generate interest, book units, and get ready to hit the ground running.

So, while you are using the data together with how to build your storage units, the size of the units, and who you want to attract, use this time and information to help you devise a marketing plan and get the word out before you are open so that when the time does come, you can get those units filled and build on things from here.

While opening a self-storage unit might not be your first thought when it comes to profitable business ideas, the figures show that not only is there money to be made in this sector, but it can also be quite profitable, even more so if you specialize in storage niche products or find a higher level of service or amenities.

Essential Industry Insights for Further Reading

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