With the recent pandemic and decline in big-box retail, there is now a significant inventory of vacant buildings out there for sale. The current trend of office vacancy rates increasing, building owners are seeking creative ways to make that empty space generate profit again. As such, some are converting these structures into self-storage facilities or selling them to others who wish to do so.
While this development path can be an efficient time and cost-saver, there are important considerations. This blog will help you decide if conversion of an existing building is the right path for you to be able to properly transform a structure into a well-built self storage facility.
Like any building project, there are definitely pros and cons to consider for conversions of existing buildings into a self storage facility. Here’s our take.
Pros. Because of the amount of inventory out there, you may be able to purchase an existing building for less than it would cost to build it, so after completing the renovation, you’ll have a lower cost basis for your project. Another advantage is that if you maintain the footprint, access points, and site circulation, you may also be able to avoid going through the site-plan approval process with the city, which can save money and simplify entitlements. These advantages add up to an expedited construction schedule at a lower cost.
Cons. On the flip side, since the structure wasn’t originally built with self storage in mind, it may not always be located in an optimal location for visibility. In addition, the design needs to adapt the building can cause irregular unit sizes and long travel distances from loading areas to units. One other consideration is zoning. This can be a problem since many vacant buildings in commercial zones don’t allow for self storage. Finally, it is important to assess the acquisition price and building condition against all the costs of the conversion and anticipated profits down the road to determine if conversion is the right business strategy.
Along with the pros and cons mentioned above, following are some other considerations.
For any self storage building project, whether it’s a conversion or one being built from the ground up, your site selection is the number one consideration. Retail-like visibility is always preferable to being out of sight. No amount of online marketing can replace the free exposure of being located along a frequently driven, high-traffic route. Proximity to potential customers is key.
One of the most restrictive challenges in pursuing a conversion project is finding a building where self storage is permitted. Thankfully, many jurisdictions appreciate creative solutions to filling empty structures. A zoning authority that has a positive view of storage as a community-serving use will aid your cause; however, if storage is still considered an industrial use that should remain on the periphery of communities, your development path is going to be all uphill, costing excessive time and money.1
As in any type of self storage build, it is critical to understand rates, occupancies, and the competitors around you. The team at Forge always recommends that a complete and thorough market study be completed. It is also key to investigate whether or not self storage is allowed in the zone where the building is located. If it is, then you may need a conditional-use permit or rezoning permit.
Forge also always recommends that you check the title and survey to determine if there are covenants, conditions, and restrictions, easements, and other agreements that could impact your ability to convert the building. It’s common, especially with retail properties, to have private restrictions that prohibit self storage, easements that impact circulation, common-area maintenance fees, shared utilities, etc. Environmental problems are also common, especially in older manufacturing and warehouse facilities. Thoroughly understanding your site and its history is a key part of having a successful project.
When looking at starting a conversion project, typically a commercial zone 2 (C-2) location is the most desirable in a market area. It will typically have a large and destination-bound traffic count and great visibility. In addition, facilities in C-2 typically rent up faster than those in light industrial 1 (I-1).2
It is also good to eliminate any potential site that cannot accommodate a minimum of 50,000 net rentable feet. This is typically optimal for cost-efficient management.
Once you have your site selected, you will need to assess the structure itself – the roof, structure, parking lot, mechanical, etc. In addition, many old buildings have refrigeration systems and other items that are costly to remove. Asbestos, and other hazardous materials remediation may also need to be addressed.
Floor load. If the building you are looking to convert is a multi-story building or has a mezzanine, it is key to ensure the floor load is adequate for self storage use.3 One of the most significant costs in the conversion of office space to self storage will be the assessment and likely remediation of the structural system. Most office buildings have been designed and constructed with a much lower live load than what’s required for self storage, often rated for 50 to 80 pounds load per square foot (PSF) compared to 125. That’s about a 50 percent deficit.
To help you calculate the loading design, it is key to do field measurements with limited destructive testing and a structural engineer. (See our blog titled, “Designing a Self Storage Facility – How to Select Your Design Team”)
If the structural engineer finds that the structure doesn’t meet the required loading for self storage, there are still solutions. Adding light-gauge bearing walls is the most cost-effective, while reinforcing existing beams could also be sufficient. Reinforcing under-bar joists is the costliest solution.
Rentable Space. Most urban and suburban self storage facilities are 100,000 to 120,000 gross square feet. However, taking into account elevators, stairs, and corridors may reduce the rentable yield to 75,000 to 90,000 square feet. It’s key to know what amount of rentable square footage is necessary to be profitable.
Another consideration you will need to make in this same area of the design, is the average unit size and mix.
In a standard conversion, you’ll use the existing building without changing the overall footprint. This is the easiest, most straightforward type of project. Depending on the building, it is also common to add one or more floors in the existing footprint.
Increasing the rentable square footage of the building through a footprint expansion or the addition of more structures can be another great option. This may include adding drive-up units or vehicle storage in the rear or side of the building.
At the end of the day, the design of your conversion will play a significant role in its success.
Thermal envelope. Energy-code compliance has only been around since 2012. Therefore, the level of renovation necessary will depend on the existing wall, slab, and roof.
Elevators. Check to see if the existing elevators are in your tenant loading/unloading area. A self storage elevator should have a 4,500-pound capacity with a taller cab to accommodate large pieces of furniture.
Loading area. An appropriately sized loading and unloading area with ample space to maneuver large vehicles, such as moving trucks, is key. Your loading area should have a minimal vertical clearance of 14 feet. It should also be convenient to the building interior, particularly the elevator.
Self storage has some of the easiest mechanical systems of any real estate type. In the case of an office conversion, the goal is to minimize replacement. The preferred self storage HVAC system is a residential-sized split system with minimal to no ductwork. Boilers and other perimeter unit systems lack efficiency.
A sprinkler system will likely be a code requirement for self storage structures of 100,000 square feet or more. If your building has such a system already, the upgrades should be minimal. The large open areas with no ceilings allow for an optimized sprinkler-head layout.
The last item to evaluate is the electrical system. Typically, the system already in place is likely to be sufficient to meet your self storage needs, but plan to replace the lighting to more energy-efficient LEDs with motion sensors.
The exterior look of the building is key, especially to potential customers driving by. That’s why it is key that your building stands out. Fresh paint, clear, visible signage and nice landscaping increase the curb appeal.
The building-conversion process always comes with extra surprises. Therefore, it’s important to carefully select a professional design and construction team with self storage experience such as Forge Building Company (see our blog titled, “Designing a Self Storage Facility – How to Select Your Design Team”).
Self storage conversions are a great alternative to ground-up development. Evaluating the site, assessing the building, designing the project, and understanding the costs will provide you the information you need to make a wise decision. Finding one that meets the criteria for self storage with limited need for remediation can be a tricky, so working with the team at Forge Building Company can make the process much easier. The budget savings of building a self story facility from a conversion can be 25% to 50%. Give the team at Forge a call today, we would love to help you convert an existing building.
1. Brown, R. (2023, March 22). Inside Self Storage. Retrieved from Insideselfstorage.com: https://www.insideselfstorage.com/conversions/converting-old-office-buildings-outstanding-self-storage-facilities
2. Pollack, L. (2012, July 20). Inside Self Storage. Retrieved from Insideselfstorage.com: https://www.insideselfstorage.com/conversions/retrofitting-building-your-dream-self-storage-facility-guide-intrepid-souls
3. Wyckoff, S. (2021, January 21). Inside Self Storage. Retrieved from Insideselfstorage.com: https://www.insideselfstorage.com/conversions/self-storage-conversion-projects-pros-and-cons-building-assessment-design-pitfalls-and