Step 1: Define Demographic Criteria

Demographics are the backbone of self-storage site selection. Understanding the characteristics of the local population helps you gauge demand and competition with precision. Here is a sample of some demographic factors to consider:

1. Population Growth:
Many developers advise that you “follow the rooftops.” Look for areas with a projected population growth rate greater than 1-2% annually over the next five years. Growth means more residents, and more residents mean greater demand for storage. It’s crucially important to understand not only what projected population growth looks like, but the incoming housing that is already in the works to support this growth. While a city may be projected to grow, the housing supply must be there for this to become a reality.

2. Median Income:
Target areas where the median income exceeds $60,000 per year. Median income gives you a sense of the market’s purchasing power. It’s a quick litmus test for potential affordability.

3. Square Foot Per Capita:
Focus on markets with less than 8 square feet of self-storage per capita. That said, as I’ve outlined in my previous Stats with Starr column, the correlation of rent PSF to supply per capita basically stops at 8. It may be fruitful to expand your horizons with supply per capita.

4. Incoming Facilities:
Decide whether to prioritize areas with fewer than one incoming storage facility (low competition) and those with multiple new housing and commercial developments (indicating strong demand).

Step 2: Establish Facility-Based Criteria

Your buybox isn’t just about location; the property size matters just as much. Here’s how to narrow your focus:

1. Facility Size:
Define the minimum and maximum size of facilities to consider. “Smaller sites can be easier to develop and lease up,” one operator noted. For instance, you might target properties under 40,000 square feet, which determines the site acreage size requirements.

2. Rent Structure:
Set clear benchmarks for market rents. If 10×10 non-climate units rent for less than $1.25 per square foot, new developments may not pencil. It’s important to look not only at the target facilities, but also understand how their rental rates compare to the overall market. While a facility may look great, if rates are too high above the market averages, they may currently have (or end up with) lower occupancy.

3. Additional Factors:
Consider frontage, visibility, access, flood zones, traffic counts, wildfire hazard, and how many REITs are nearby. 

Step 3: Utilize Data Tools

Technology is your best friend. Data platforms like TractIQ make it easy to input your criteria and generate a shortlist of properties that fit your buybox. You can send your buybox to your broker, or use owner data to contact owners directly. These tools save hours of manual research and give you confidence in your decisions.

Step 4: Document Your Buybox

“If it’s not written down, it doesn’t exist”. Keep your buybox organized and consider getting buyin from your investment committee. Record each parameter, and make updates as your strategy evolves. This keeps everyone on your team aligned and reduces confusion when you bring a site to investment committee that checks the boxes.

Step 5: Review and Iterate

Your buybox isn’t set in stone. The market changes, and so should your criteria. Regularly revisit your buybox to ensure it reflects current trends and lessons learned from past deals.

Cautionary Notes

• Prioritize Criteria: Not every property will check all the boxes. Focus on sites that meet most criteria while aligning with your broader strategy.

• Combine Data and Intuition: Numbers are critical, but don’t discount a gut feeling about a market.

• Communicate Updates: Share changes to your buybox with your team and brokers you work with to avoid misalignment and make sure you’re seeing the right type of deal flow.