Self-storage conversions are creating a buzz as the self-storage industry looks to expand supply to meet growing demand amid difficult municipal zoning and permitting environments across the nation.
“It’s really been a trend over the last couple of years,” said Jeffrey Shouse, executive managing director of valuation & advisory services at Colliers International. “We are seeing a lot of supply coming on the market based on conversion projects.”
Getting city permitting and zoning approvals for self storage construction has become increasingly difficult in many municipalities but converting an existing vacant building into self-storage often is cheaper, faster and easier than new development.
These adaptive reuse projects are often in highly visible locations in underserved markets. In some instances, cities appear more willing to approve self-storage conversions as once vacant buildings return to the tax rolls—but not always.
http://t.co/yoAmqd3f2k U-Haul Unlocks Tastykake Plant With Self Storage Conversion #PHILLYnow pic.twitter.com/b726AW6NJj
— PHILLYnow (@PHILLYnowAPP) June 17, 2015
Conversions galore
Here are some recent conversion announcements, some moving forward and some facing opposition or delays:
- U-Haul International Inc. recently announced it will convert a former laser-tag arena and arcade in North Smithfield, RI, to 667 self-storage units.
- U-Haul also plans to convert a former shoe-manufacturing plant in Newark, NJ, that has sat vacant for many years into self-storage. For hyperlink:
- Real estate developer Highland Development Ventures sought to convert warehouse space once used by Ashley Furniture in Franklin, WI into self-storage, but the city’s plan commission raised concerns about Highland’s plans to convert the building into three stories to provide more visibility, and tabled the issue.
- Dov Limited plans to convert a former grocery store in Delhi Township, OH, near Cincinnati, to self-storage. The building has been vacant for more than 10 years.
- U-Haul’s plans for a self-storage facility at a former factory in New Haven, CT are on hold while city officials pursue residential-development options for the site. U-Haul bid around $6 million for the property, more than the residential-development bid of about $5.5 million.
- MPV Properties and Selwyn Property Group seek approval to redevelop the existing building at 200 Clanton Road in Charlotte, NC into a 73,000-square-foot self-storage facility, according to theCharlotte Observer. (pictured at top)
Savvy developers
A wide variety of existing buildings are being converting into self storage. They range from warehouses and car dealerships to empty big-box retail stores.
“They look great,” said Shouse. “Developers are very savvy how they build these things. They make them look nice and fit into markets. It’s a re-gentrification process.”
Ben Doherty, head of Self-Storage & Industrial Investment Strategies for Crow Holdings Capital–Real Estate in Dallas, said the conversion space is an attractive component of CHC-RE’s self-storage investment strategy. CHC–RE has multiple conversion projects underway, he says.
“Conversion opportunities can provide an urban or infill location with close proximity to existing or growing residential areas with visibility from major transportation corridors that might not otherwise be available,” Doherty said. “Additionally, conversions can sometimes provide a speed to market and a more predictable cost of completion when compared to development opportunities.”
Industry shifting
Exactly how many self-storage conversions are underway or planned is somewhat difficult to gauge as no one appears to be keeping statistics. Panelists at this year’s Inside Self Storage and Self Storage Association conferences estimated that about 10 percent of the 500 to 700 self-storage facilities that will come online this year will be conversion projects, Shouse said.
The trend for more conversions is likely to continue, says CHC–RE’s Doherty.
“Strong interest is anticipated to continue in conversion projects with infill locations and particularly those locations with proximity to existing or new housing developments,” Doherty said. “In many markets, urbanization is increasing with millennial or other lifestyle changes, and in general, residential housing today occupies a smaller footprint which should continue to drive self-storage demand.”
Shouse agrees.
“It’s an exciting time for self storage,” he says. “The days of thinking of a drive-up gravel street with a single-story storage facility is over. The pendulum has shifted to more vertical buildings, climate control, nicer office buildings and conversion projects. The industry is shifting.”
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