In the past, self-storage has been simply that, storage. Certain amenities, such as conference rooms or office cubicles were often offered. But we are talking about introducing an entirely new use into the physical plant – that’s fifth generation to Leitbox. And this evolution is both better for the community and often required to get the best locations.
MIXED USE ENHANCES SUCCESS RATES IN SECURING ZONING APPROVAL
Think about it. From a political standpoint, why would a mayor or city council approve storage in their premier urban or retail-centric corridors. The facility does not create substantial jobs (usually 2), the facility does not generate significant sales tax revenue (box and locks), and the facility does not produce material impact fees (2 bathrooms!). So, why allow the zoning? Fifth generation storage integrates other uses to overcome this reluctance.
We typically prefer to introduce what we call high-urban-street-front retail. We do not change the scope of the business plan, as this retail component is usually about 4,000 SF in a 90,000 SF building (4% of the total SF). But what it does is produce a great looking storefront, more jobs, and sales tax revenue. If we deem the area more appropriate for shared office space, we execute on this use too.
REDUCTION OF RISK OPPORTUNITY
The secret “profit-kicker” to mixed-use integration is the break-even occupancy benefit. Mixed use will often decrease the risk of the overall investment. We have found, if we lease all 4,000 SF of retail, open and operating on day one, then our break-even occupancy declines on average from 50% occupancy to 35%. The retail lease income is approximately the same amount as 15% of the storage income, and the retail pays 100% of its contractual rent day one; there is no absorption period. So, we realize a lower break-even and, therefore, a greater profit opportunity.
USES WE INTEGRATE
We often get asked what retail uses do you introduce into the storage building? That is determined by the submarket and the other retailers represented in the market. We utilize the same leasing standards we have plemented for the last 25 years with lease guarantees, tenant co-investment in the space buildout, and overall creditworthiness. If the tenant can pass the underwriting test, we welcome users typically spanning various types such as Fedex/UPS stores, coffee & juice shops, professional services and, lastly, health and wellness. We also see a combination of retail showroom with a large storage unit to inventory supplies. Think artisan jewelers or custom home furnishings. The storage facility only needs about 6 parking spaces, so the retailers never have to fight for parking. It’s the perfect combination of a passive use (storage) with an active, customer-heavy use (retail).
Many of the better markets, such as areas of Charlotte, Nashville, and Miami have passed new ordinances requiring mixed use integration into self storage to meet newly-adopted master plan overlays. Mixed Use in a self storage format is growing.
LEITBOX STORAGE PARTNERS, LLC
The Protective Center - 2801 Hwy 280 S, Suite 345, BHM, AL 35223
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