Turn a Defunct Big Box Store into a Storage Facility
When huge retailers like Walmart and Toys-R-Us close their locations, they leave opportunity behind. Here’s how to convert a big box store into indoor storage.
Toys R Us opened its first store in 1957. The next decade, Walmart, K-Mart, and Target all opened their first locations within months of each other in 1962. The era of “Big Box store” was booming.
Fast forward 50 years and we witnessed the shuttering of some 800 Toys R Us locations in 2018. Sears, K-Mart, Best Buy and JC Penny have all begun to fall victim to the massive migration to online retail.
Once bold and bright, these former bee hives now sit empty. Millions of square feet in cities around the country sit unused. And this presents huge opportunities.
Self Storage is now a $38 billion industry and converting a former big-box store is less expensive and easier than you might think. Keep reading for insight into how converting a building for storage could be a lucrative business venture.
Why Convert to Storage?
Retailers can no longer justify a 50,000 sq ft footprint. Even if it’s not a dying company, they typically only keep their strongest locations intact while the other stores whither away in obsolescence.
Converting one of these buildings to storage is typically 30% cheaper than building from the ground up. Conversions also require less time.
Another benefit is that the retail chain has done a lot of the leg work for you. Their locations are usually in well-established communities in a great retail corridor.
These communities hate seeing the eye-sore of an empty building. Your rejuvenation of the space will not only bring welcome energy to the shopping center but will also garner thanks from the community. Many cities are so eager to rid their landscape of the vacancy that they’ll change zoning laws to adapt to your needs.
Keys to Success
As mentioned above, there’s a good chance the empty building you’re seeking to convert is already in a good location. But to be sure, you need to keep a few things in mind.
Visibility is crucial to your facility. You need to make sure you have a good amount of drive-by traffic and access to your property. Being located near an interstate is always a good idea.
Ideally, a storage facility should be located within 3 miles of a 50,000 person population or more.
The building needs to be at least 25,000 sq ft and you should look to pay $40 or less per square foot. An average storage unit has 46,000 sq ft of rentable space. Additionally, a building with 22-24′ high ceilings will allow for two floors, maximizing the profit potential.
Who is Your Customer?
Storage unit customers are generally middle to upper-middle class. Their ages range from the early ’20s to late 50’s.
The more renters in your area, the better. The logic is that people who rent their homes have smaller spaces and less storage. As a result, renting storage space is always cheaper than renting a larger living space.
Storage units thrive in cities where there is a constant flow of new migration. With new people moving to start jobs, the demand for storage space increases substantially. Locating your facility near one of these fast-growing metropolitan areas is a good foundation to start your business.
Former Big Box Store Buildings
National retail chains most likely built their own buildings as the anchor to the shopping center. This means that the facilities and infrastructure have a good chance of being well-maintained.
It’s always recommended that you do a walk-through with a professional architect and a certified contractor. Show them your business plan and intentions for the space, including how many units you desire to have.
HVAC systems in these buildings are huge. A thorough inspection will be needed to see if they can fit your needs for being “climate-controlled.” Making the decision to be climate-controlled is very dependent on the region where you intend to open your facility.
The foundation will have to be inspected to make sure the foundation is rated to support the weight imposed by storage units. Roofs need to be free of leaks as water damage inside units can quickly sour your business’s operation.
Currently, the national average rent for a storage unit is $88.85, which equates to $0.96 per square foot. Depending on population density, proprietors can potentially get $1-2 per square foot and even as high as $4 a square foot.
Average occupancy runs from about 70% – 95% filled. During the “lease-up” period in which you gain tenants, it could take as long as 36 months for your occupancy to level off and stabilize. Stabilization is your goal because that’s when cash flow will become positive.
73% of storage businesses are owned by small operators and that’s a very reassuring number for people looking to get in. To know that the industry isn’t being gobbled up by the big boys presents a great opportunity for success.
Companies like U-Haul have been on a nationwide mission to convert a myriad of old buildings for their locations. Since 2017, they’ve purchased 111 properties for “adaptive reuse.” This helps their business fit into the unique neighborhoods they enter.
A larger company like U-Haul converting so many defunct buildings demonstrates that there is lucrative potential in the market. 9.4% of American families rent a storage unit. That translates to 30 million customers nationwide.
A Fertile Market for Now
In 2018, rental and occupancy rates reached a new peak. As Baby Boomers continue to age and downsize, the demand for off-site personal storage will assuredly grow.
34 national retail chains have announced more store closings in 2019 than they did in 2018. 75,000 retail locations could close by 2026. Retail giants like JC Penny and Bed, Bath and Beyond are closing over 70 locations in 2019 alone.
The bottom line is that these vacant buildings can fill a huge need. A big box store in your area could bring substantial value to the community and potentially big revenue to anyone who can follow through on the conversion to storage.
Regardless of the economy, storage units succeed. They have proven to be resilient in times of recession. Snatching up one of these vacant buildings is definitely an investment with great ROI.
Be sure to contact us for the tools to bring your personal storage business to life!