What You Need to Know About Self-Storage Conversions

The need for self-storage facilities has significantly increased due to pent-up demands from years of no new products, a steadying economy, and more people choosing to live in densely populated areas. This shift has resulted in the need for new, state of the art self-storage facilities in and around bustling suburban and metropolitan areas.

There are 2 options for constructing new self-storage units: ground up or conversion. Click To Tweet

There are two options for constructing new self-storage units: ground up or conversion. Both have pros and cons and require substantial time, planning and money. If you are looking to build from the ground up, it is important to know that the permitting process may have hurdles, construction can take longer than expected and hard costs tend to be higher. Conversely, conversions can have their own setbacks, including unfavorable and unknown existing building conditions and access limitations. The key to a profitable conversion requires research. Once you find an existing building that is easily accessible, has little damage and major curb appeal, you are headed in the right direction.

The key to a profitable conversion requires research #StorChat Click To Tweet

PROS of Conversions

Most buyers are looking to convert a vacant warehouse, grocery store or other large indoor facility that can be remodeled in a short amount of time because of its existing structure. When purchasing a building or facility, visibility and accessibility are crucial. When you consider a conversion, ask yourself, “Would I build a ground up facility at this location?” Typically, an existing building has an easier time getting through the zoning process. Moreover, a community tends to be more lenient with conversions because the building already exists, and there is less construction required. You may also avoid extra costs because a new facility must meet current codes, such as energy codes. Converting can also bring down the overall costs of a facility structure because HVAC systems or other equipment may already exist on the site. All of these factors can influence the success of your facility.

“Would I build a ground up facility at this location?” #SelfStorage Click To Tweet

CONS of Conversions

Conversions can be costly if the building has infrastructure flaws; roof and HVAC systems are often issues. If the existing building’s points of access are blocked or it has multiple internal stairwells, it may be hard to change the layout of space without incurring steep costs. Are there environmental issues such as asbestos? If so, this could be a costly remediation. In addition, if the facility you are considering converting is in a poor location, you may need to spend funds marketing the property or consider paving a larger parking lot for easier access. These hiccups can be both expensive and time consuming.

 

Conversion Trends

Self-storage conversions have drastically changed over the past two decades. Today, if you find a building that has enough interior height clearance, you can put in a mezzanine and double the potential rentable square feet. If your conversion has enough parking space, you can add an exterior freestanding building or extra parking as an additional phase. These are just a few examples of what you could do with your conversion project.

Conversion trends- read about them here! Click To Tweet

Why Banks Like Conversions

Finding the right lender who has knowledge and experience in the self-storage industry is critical to the success of your conversion project. Banks tend to like conversions because they are less time consuming than ground up construction, which allows the borrower to open, be in the market and break even faster. Overall, fewer surprises can occur with conversions compared to ground up. The right lender will help you move through the process quickly and easily. Live Oak specializes in loans to the self-storage industry and has structured our lending and funding solutions around the industry’s specific needs.

What You Need to Know About Self-Storage Conversions #SelfStorage Click To Tweet