The Most Impactful Decision to Affect the Future Success of a Self-Storage Development: Where to Build

While the pause button has been pushed on self-storage development recently, the future looks bright, with projections for resumed growth on the horizon. The global market was valued at $57.7 billion last year and is expected to reach $83.6 billion by 2031, according to Coherent Market Insights, a market-intelligence and consulting group that provides syndicated and customized research reports. That’s a compound annual growth rate of 5.4%.

These numbers are fueling enthusiasm about the future, and self-storage developers are putting their money where their mouths are regarding new projects. As of December, there were 3,305 projects under some phase of development nationwide, according to a January 2025 report by Yardi Matrix, a source of commercial real estate market intelligence. That pipeline included 2,053 planned facilities (those that have been approved with planning and zoning), 790 that were actively under construction and 462 prospective projects seeking approval.

Despite this activity and optimism, self-storage developers must still exercise prudence. If you’re planning to move forward on a project, you must have a clear understanding of the following fundamental factors.

Initial Decisions

One of the most appealing aspects of developing a self-storage facility is the wide range of options available in terms of building types and amenities. One of your first steps is to decide what you want to build.

Will you start from the ground up on vacant land or convert an existing structure?
Will the facility be single- or multi-story? If the latter, will it include an elevator?
Will the units be drive-up or facing the interior of the building?
Will the project offer climate-controlled space?
Will it include flex space, vehicle storage or other types of storage?
If it offers vehicle storage, which type will it be: open parking, canopied, three-sided or fully enclosed?
Will the facility use automation? If so, what infrastructure will it require?

As you can see, there’s a lot to think about when choosing which style of self-storage to develop. But that’s just the beginning.

The Essentials of Site Selection

Of course, many of the decisions you make in the early phases of self-storage development should be driven by location and market. Site selection is critical, as it impacts the future success of the project in many ways. Once you’ve found a parcel you believe will work, you need to investigate the following.

First, make sure the land is properly zoned for self-storage. You can confirm this with the local building or planning and zoning department. “Sometimes a developer can apply for a rezoning; but because of the cost and time [required] for this, you don’t see many developers—except for real estate investment trusts—go this route,” says Barry Sherman, founder of S3 Partners, a commercial development and design firm that specializes in self-storage.

Next, investigate potential design requirements and restrictions for the municipality. Check height limitations for multi-level structures. Confirm the site isn’t in a flood zone. Also, conduct a Phase 1 Environmental Site Assessment to identify existing or potential contamination liabilities on the property.

If all of the above looks good, your next step is to order a professional feasibility study. I can’t over emphasize how valuable this is. The results will provide you with peace of mind by confirming the land and community are a fit for your project or suggesting otherwise to help you avoid a bad decision. Additionally, it reassures lenders about their risk, making them more confident in providing the millions of dollars needed for the project.

“By thoroughly investigating all aspects during the site-selection process, you can mitigate risks and maximize the potential for your self-storage development’s success,” Sherman says. “It will ensure that you are well-positioned to meet current and future customers’ needs while maintaining a sustainable and profitable operation.”

Just make sure that the feasibility consultant you hire has extensive experience with the type of self-storage facility you plan to develop. If you already have a lender in mind, confirm that they’ll accept the report from your chosen professional, so you don’t have to invest in feasibility twice.

What a Feasibility Report Should Include

A feasibility report will cover several key elements to help confirm your self-storage project’s viability in the chosen location. These include:

Competition analysis. Your feasibility report should examine the other self-storage facilities in the area, including their class grade (A, B or C), occupancy and pricing for various unit sizes. This section should also note any upcoming projects in the target area.

Demographic information. This includes population numbers and growth rates, average income levels, and average age. These factors are essential for determining the right unit mix for your self-storage project.

Design recommendations. Determining the site layout, including traffic flow, building position and landscaping, is crucial for maximizing the parcel’s potential. Unit mix is another essential component of this section. Consider what your customers will want and need. What will ensure proper lease-up and long-term stable occupancy?

Construction budget. With input from you, this section should cover hard costs (materials, equipment, subcontractor and labor fees, permits, etc.) and soft costs (architectural design, engineering, insurance, legal fees, financing fees, etc.). One expense that’s often overlooked in this section is the lease-up interest needed to cover monthly payments until the property breaks even. If this is called out in the feasibility report when applying for construction funds, it’s typically factored into the loan itself. This is helpful, as then you won’t need to pay out of pocket or secure a second or bridge loan to cover it.

Operations budget. Every self-storage feasibility study should include a detailed, line-item operations budget projected for at least three years. This helps you know exactly when you’ll break even and what your debt-service coverage ratio (DSCR) will be. Most lenders expect a DSCR of 1.15 to 1.3 by the 24th month of operation, depending on the type of loan and the lender.

This section should look closely at all operating expenses, particularly significant costs like property taxes and business insurance. Make sure these are realistic and not too low. Without accurate data in this category, it’s impossible to project return on investment.

Good Decisions Lead to Long-Term Success

A self-storage development can yield exciting opportunities, especially with the market poised for such growth; but success hinges on careful planning and consideration of key factors. By understanding market dynamics and making informed decisions about site selection, design and financing, you can ensure your project is set up for long-term profitability.

Stephan Ross is owner of Cutting Edge Development LLC and a managing member of Cutting Edge Self Storage Management & Consulting. He’s been in the self-storage industry since 1984 and has performed hundreds of feasibility studies in the United States and Canada. He’s a contributing writer for industry publications and a featured speaker at self-storage events. To reach him, call 866.970.3343 or email [email protected].

About the Author

Stephan Ross

Owner, Cutting Edge Self Storage Management & Consulting

Stephan Ross is owner of Cutting Edge Development LLC and a managing member of Cutting Edge Self Storage Management & Consulting. He’s been in the self-storage industry since 1984 and has performed hundreds of feasibility studies in the United States and Canada. During his career, Steve has directed the development and daily operations of more than 2 million square feet of storage space. He’s been a contributing writer for industry publications and a featured speaker at self-storage events. To reach him, call 801.273.1267; email [email protected].

See more from Stephan Ross

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