Emotional data: Find Land for Self-Storage Development

To find the perfect parcel of land on which to build, self-storage developers are taught to review tons of empirical data, which takes a lot of time. But the reality is just about every option is going to miss the mark in some regard; and market statistics like population, household income, traffic counts and rental rates don’t always tell a complete story.

In a commercial real estate context, “empirical data” refers to “tangible, verifiable information about properties, their sales and market trends, gathered through observation and analysis,” according to Google AI Overview. It's objective, measurable, quantifiable and verifiable. It includes market-performance metrics (e.g., rental rates per square foot, occupancy rates, cap rates, sale prices per square foot) and demographic/economic indicators (e.g., population growth, employment statistics, income levels, consumer spending patterns).

On the other hand, emotional data is the information you gather through your own eyes when you visit a potential self-storage site. It can sometimes reveal a property’s true potential—or its hidden flaws. After you’ve reviewed the empirical data, drive around the subject area. It’ll speed up the decision-making process and help you find more opportunities. If you rely solely on standard market data, you’re going to find fewer viable parcels, and it’ll take longer.

A Lesson From Walmart

I first learned about the power of emotional data when I designed a Walmart in Connecticut many years ago. Before the project even started, a member of the Walton Family, which owns the retail chain, flew into our tiny airport and drove around town for a day. They approved the site the next day without even looking at a demographic report.

Walmart and Kmart both opened their first stores in 1962. Kmart quickly pulled ahead by a couple hundred stores by leveraging tons of empirical data; but now the company is out of business, and no one can even remember who founded it. The Waltons, who regularly make decisions based on emotional data, are the richest family in the world.

Applying Emotional Data

After that experience, I realized that the best way to assess market demographics isn’t to just read about them on paper but to see them in person. For example, I once built a self-storage site in Florida. It was on a dead-end street with virtually no traffic. The empirical data told me to run as fast as possible, but the emotional data told a different story.

The street was parallel with the main road and had good visibility. There was also a connector between the two streets, providing easy access. In addition, the parcel could be seen from a nearby Walmart parking lot. This parcel had had been passed up by many real estate developers who were only looking at the empirical data. Once built, this facility reached $100,000-plus in monthly income in no time.

The best way to learn the real demographics of a self-storage site is to visit the area during the day and after dark. Drive three miles in every direction, and you’ll better understand what the empirical data means. Would women be willing to drive in this area at night? Are the houses in the community nice?

Curb appeal is sometimes a better indicator of household income than the statistics reveal. For example, let’s say a Florida market has a population of 15,000, and the economic data shows the average income is low. But upon driving through the area, you discover there’s a large college campus and a neighborhood full of affluent retirees. This emotional data tells a much better story than the one in the demographic report.

Traffic count is another common metric considered by self-storage developers, but again, personal observations can sometimes be better than statistics. To gauge the level of drive-by traffic, find a property near your target parcel and pull into the driveway during rush hour. Then attempt to leave again. If you can get out with no problem, it’s a C-grade traffic site. If you encounter car after car and you must wait a bit, it’s a B-grade site. If you must wait so long to get out that you’re getting impatient, you have a site with A-level traffic.

Analyzing Market Rates

Market rental rates are also important when assessing the potential of a self-storage development site, but they must be looked at from an empirical and emotional point of view. Many operators charge three sets of prices: online rates, which are often extremely competitive; office rates, which are generally higher than web rates; and achieved rents, which are the final monthly prices after teaser rates have expired. All are critical, but if you only look at the data that’s easiest to obtain, you’ll pass up good opportunities.

Achieved rental rates are the most important to know when choosing a development site, but they’re also the most difficult to determine. The approach is to visit the competition and ask how often they raise their prices and by how much. Some operators will tell you; some will give you a corporate phone number; some will squirm in their seats and say they don’t know.

You might even need to rent one or more units in the market to help you determine these achieved rates. I recently rented a space in Florida for $65 per month. After two months, I received a notice that my rent was increasing to $130. The bottom line is published self-storage rental rates (empirical data) can’t always be relied upon.

It Takes Both Data Types

Why are potential self-storage sites passed up by some developers and turned into successful facilities by others? Why are three out of four zone changes denied? Why is square foot per capita not a suitable metric to determine market demand? Why do many operations rent up slower than projected? The answer is emotional data and its impact on the decision-making process.

For example, empirical data may have you believe that two self-storage development sites are equal in terms of competitors’ rental rates, occupancy and square foot per capita. It may even convince you to reject both. But if one is in a market with a significantly higher population, it may be suitable for an operator with an aggressive sales and marketing plan. There are lots of ways to take 10% to 15% of each competitor’s rentals!

Over the past several years, self-storage developers have been inundated with empirical data and left the wisdom of emotional data behind. You need to understand and use both for success in today’s market. Just remember that using emotional data doesn’t mean going with your gut. You must still observe and gather information. Taken all together, this intelligence should help you make smart site selections.

Marc Goodin is CEO of Storage Authority LLC, which operates self-storage facilities in two states and has 31 franchises nationwide. He has more than 30 years of industry experience and owns three self-storage facilities that he designed, built and manages. To reach him, call 860.830.6764 or email [email protected]. You can also purchase his books on facility development and marketing in the Inside Self-Storage Store.

About the Author

Marc Goodin

President, Storage Authority

Marc Goodin is president of Storage Authority LLC, which operates self-storage facilities in two states and has 31 franchises nationwide. He has more than 30 years of industry experience and owns three self-storage facilities that he designed, built and manages. To reach him, call 860.830.6764 or email [email protected]. You can also purchase his books on facility development and marketing in the Inside Self-Storage Store.

See more from Marc Goodin

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