Covid accelerated the adoption of online meetings, working from home, and riding the Peloton. The Wall Street Journal recently released an article discussing one of these trends: the prevalence of shoppers ordering goods online and then picking them up at the store, which is particularly popular at places like Walmart and Target.
COVID led to a scramble to offer self storage leases online since the largest storage companies, Public Storage and Extra Space Storage, did not yet have that capability. You could make a reservation online but would be required to pay over the phone and pick up the keys in person. Now, 60% of customers book their units either partially or fully online, as confirmed by multiple contacts at the major REITs. This underscores the massive shift that has occurred over the past four years. Since most customers find units online, does it even matter if your location is at ‘Main & Main’ or tucked back in an industrial park?
The answer is that it depends. In some markets with more relaxed zoning, commercial properties can be zoned for self storage, meaning that an undeveloped corner lot, which traditionally, would be some type of retail use, can be developed for storage. In markets like these, it’s a no-brainer to be in a high-traffic area where you’ll get the most visibility.
In certain regions and municipalities, finding land with the appropriate zoning for storage facilities is incredibly challenging. A prime example is DXD's Nantucket property, the only undeveloped and privately-owned land on the island with the necessary zoning for self storage. Due to these constraints, the opportunity to develop a facility on the island holds significant value, regardless of its visibility. This is underscored by the fact that existing self storage facilities are located in industrial areas, and have some of the highest rental rates DXD has ever seen.
In contrast, in markets like Mesa, AZ, having frontage on a main road is essential due to changes in land use regulations over time. Forty years ago, there were numerous undeveloped parcels on arterial roads where storage facilities could be built. Now, these are main roads with tens of thousands of vehicles per day and infill land parcels are only sporadically available. This is the story around DXD's site in Mesa, where other facilities were constructed in 1978, 1985, 1986, and 1973, all with frontage or access to main roads. DXD will build a facility at a major intersection, where storage is conditionally permitted.
If DXD had chosen a site on a minor road or in an industrial area, the site might have struggled to compete with other facilities due to their more advantageous locations. Since 40% of customers reserve their units in person, a facility with little to no visibility or traffic is missing out on many potential customers.
As commerce evolves for retail and storage, site selection is among the most important considerations for DXD investment decisions. A deep understanding of the market dynamics, zoning, and land availability allows DXD to pick winners nationwide.