If you’re venturing into self storage, a well-researched feasibility study is key to knowing how well your facility will operate. In this article, we go over what you must include in the study.
If you’re venturing into self storage, a well-researched feasibility study is key to knowing how well your facility will operate. It’s imperative you perform one before going further into the project. A quality feasibility study gives you a much-needed snapshot of the market you’re entering, the community you’ll service, and whether there’s sufficient demand to support your business. While it might seem like an extra upfront cost, it will definitely pay off in the long run.
First things first, who should actually carry out the study? While it is possible to undertake the endeavor on your own, a feasibility study will often require expert knowledge and industry data you might not have access to. As a result, it is extremely common to outsource to a consulting agency in order to get a detailed report.
While third-party consultants might be the way to go, there are still a handful of considerations to think about. Check if they will be unbiased in your report? Do they have a stake in your project or something to sell if they believe your project is worth building? Another important question is to ask if the company has the correct experience, especially that they have recent experience in building and construction. If not, they won’t be able to provide you with up-to-date recommendations. This would also lead to an out-of-date construction budget, which might cause headaches down the line.
Having chosen either to outsource or to undertake the report yourself, here are the main bases your study should cover:
The study should analyse the site and give recommendations on a rough layout. You don’t need super detailed CAD drawings, and you probably won’t get them from the everyday feasibility-study providers, but having a general layout to show engineers when construction does begin will make your life much easier. This design should show the approximate square footage of your facility, and will also affect the overall construction costs. The study should also give reference to visibility, security, water management, and others in maximising the site used.
One of the cornerstones of a feasibility study, your report should provide an analysis of the existing self storage market and the competition. It should include an overview of the competing businesses, including factors such as location, square footage, unit sizes, services offered, occupancy rates, etc. It can also provide a report of any developments and projects in the works for your competing businesses. Knowing all this will let you adjust the services you will offer and the rates you choose, in order to operate competitively.
Knowing who your customers will be is essential in knowing what services you will offer as well as at what rates. Questions to ask should be what does the customer base look like, and what’s the average income per capita and household? What services do your target customers need the most? Knowing all this will undoubtedly help you shape what you offer. For example, apartment renters are normally good tenants, but make sure your prospective tenants are able to afford your service, or that they’re not affluent enough to have their own storage in their garage. Having data on your customer’s motives will also shape your demand analysis.
Supply and demand analysis
Arguably the most important aspect of a feasibility study, you have to look into the supply and demand trends of the market you’re entering. Some markets are reaching saturation with self storage, so you have to make sure the market you’re entering still has sufficient demand for your business. Your study should also reveal what consumers have been favoring, such as climate-controlled storage or larger warehouse units, and such should advise which services will be most beneficial for your facility to offer.
An especially important aspect is also to provide financial projections and recommendations. Obviously knowing how much this whole project will cost is invaluable information. To work this out, you must take into account square footage, unit size, construction costs, and relevant operating costs. The financial model should also be extended over a longer period of time, to help track progress, and also include rent reductions, deals and offers you will offer your tenants.
The importance of a well-made feasibility study cannot be overstated. They are paramount for you to understand the strengths and weaknesses of your self-storage construction project. While the report will not be 100% accurate, it will give you valuable predictors to help you make key decisions later on.
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