Self-storage developers and operators frequently fly solo. But in various situations, they might need a co-pilot in the form of a self-storage consultant.
Consultants are used for numerous reasons in the self-storage business, from feasibility studies for new construction to repositioning of underperforming facilities. Some owners might tap a consultant’s expertise before marketing a property for sale to help get the highest return possible.
If you are working with someone who knows the business, they can guide you so you don’t make costly mistakes.
— Self-storage consultant David Blum
“If an investor is new to self-storage, from an ownership perspective, a consultant is a vital part of the team,” said self-storage consultant Benjamin Burkhart, president of StorageStudy.com. “For seasoned developers, a consultant might be less necessary, but can be used to validate investment strategies, development concepts and deliver measurable, unbiased forecasts for what a market can bear, or what it takes to develop a competitive business model.”
At times, a consultant might be a necessity if financing is being sought. Some banks require a third-party analysis before agreeing to lend money, especially if the developer is new to the self-storage industry.
David Blum, president of Better Management Systems, specializes in feasibility studies that help investors decide whether building a self-storage facility in a particular market makes sense. Right now, he’s working on self-storage projects in the U.S., Brazil and Peru.
“If they decide they want to go forward, then I’m a one-stop shop for a first-time developer from design to unit mix, security layout, office layout. I can help them with operations, marketing and branding—soup to nuts,” Blum said. “If you are working with someone who knows the business, they can guide you so you don’t make costly mistakes.”
Meanwhile, more experienced clients might seek his expertise for narrower needs.
Cost vs. savings
Hiring a self-storage consultant might sound great to you, but how much does it cost?
The cost varies, depending on the services a consultant is providing. Burkhart said a high-quality feasibility study for a new development will run about $7,500 to $10,000, with due diligence for a sale falling within a similar range. Expect to cough up a minimum of roughly $2,500 to $5,000 for more limited consultation.
Cost certainly is a consideration, but so are the potential savings that a consultant might be able to produce.
Feasibility studies for new construction require a consultant to spend time in the market. While you’d be forking over money for that, Burkhart said it’s critical for the consultant to view the proposed site, gauge traffic patterns and grasp the quality of the local competition to help the investor make smart decisions—and make money.
Although consultants might seem expensive at first blush, they might save developers and operators from making costly mistakes. For example, Burkhart recalls an owner who trumpeted plans to build a 1,000-unit storage facility until he was told by two consultants that the market would support only a 500- to 700-unit facility. Burkhart said the man wisely pared down the size of the project.
For self-storage developers and operators who’ve decided to hire a consultant, it’s important to ask plenty of questions before signing a contract. Be sure to get recommendations from colleagues.
Here are some key questions to ask before hiring a self-storage consultant:
- What is your experience in the self-storage industry?
- Do you have the resources and relationships to get a development off the ground? (Ask for references.)
- What’s your availability? Can you be reached on weekends? How involved will you be in the project?
- Among the projects you’ve worked on, which ones were completed and became successful? (Ask for examples.)
When interviewing consultants, keep compatibility in mind. Being comfortable with your consultant is crucial.
No consultant needed?
Not everyone will determine that a consultant is needed. Developers and operators who’ve been in the business for many years and are familiar with their markets might not require outside help.
“I think a consultant—a good one with experience—can always pay for themselves,” Burkhart said. “But if your store is 90 percent occupied with rising rents, and you have no interest in developing more storage or selling your asset, you can do well without hiring a consultant.”