Which property would you choose?
Property 1
3 mile = 8,000 people and zero existing or pipeline facility
Using conventional demand wisdom, Demand is 8 sf/person = 8 x 8,000 = 64,000 net rentable sf is needed at this location.
Property 2
3 miles = 80,000 people and 10 existing facilities together have 640,000 sf of existing self-storage – 8 sf/person
Again, using conventional demand wisdom, Demand is 8 sf/person = 8 x 80,000 = 640,000sf
Since 8 sf/person of self storage exist at this site the demand at this location is 0 demand
I ask again, which site would you pick? Using conventional black and white data, most people would choose site 1.
I am willing to argue that this is one more time that emotional data beats traditional data.
Let’s assume that 2% of a given population will rent self-storage in a given. It can be higher or lower for multiple reasons. But it does tend to be a higher percentage with a higher population because of more apartments in higher populated areas, because people in apartments move more often than homeowners.
Site 1: new renters = 8,000 people x .02 = 160 units rented per year. Since no competition, let’s assume they all go to the new location
Site 2: new renters = 80,000 x .02 = 1,600 units rented per year. If each of the 10 locations and your new location split all the new renters evenly, site 2 would get 1,600/11 = 145 units rented per year. Just 15 units short of site 1. After we subtract the easy 145 units from the 1,600 facilities, that leaves 1,455 rentals we can steal from the competition.
But we assumed all existing 10 locations were equal to your new site, typically a grossly wrong assumption. Often half the existing facilities are going to be run down older facilities built over 20 years ago and 90% of the other half will not have a great sales and marketing plan like you can have at Facility 2.
If the new modern site 2 steals just 5% of the competition's 1,455 rentals, site 2- will rent 72 additional rentals for a total of 217 units/yr vs 145 units/yr for site 1.
I can think of a lot of ways that would allow you to steal 10 – 15 percent of the competition's rentals, making site 2 an easy winner over site 1
Over the last several years, we have been inundated with empirical data. We have forgotten the wisdom of common sense and emotional data. You need to understand and use all 3 for success in today’s market.
I have a couple of 15-minute phone openings for a Franchise discovery call or a 30-minute consultation. Both FREE.
As CEO of Storage Authority Franchising, Marc Goodin shares his passion, expertise, and unconventional wisdom with busy professionals to help them develop their own self storage while they continue their careers. He owns 3 self-storage he designed, built, and manages. He can be reached at marc@StorageAuthority.com or directly at 860-830-6764 to answer your franchising, development, partnerships, marketing, sales and operations questions. His best-selling self-storage books are available at Amazon.
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