Shopping Centers Today

APR 2018

Shopping Centers Today is the news magazine of the International Council of Shopping Centers (ICSC)

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12 S C T / A P R I L 2 0 1 8 S elf-storage companies are seeking growth opportunities by snapping up vacant anchor spaces at malls or by buying up lagging strip centers outright. At Richmond Town Square mall, in Richmond Heights, Ohio, the bulk of a 162,200-square-foot former Macy's is on track to become a self-storage facility operated by third-party man- ager CubeSmart. Repurposing retail sites is a clear trend in the self-storage sector, says Cory Sylvester, principal of New York City–based Union Realtime. This analytics firm and site-selection plat- form bills itself as the clearinghouse for in-depth data on every self-storage operator and market in the U.S. The biggest driver is the influx of retail boxes and properties hitting the market in the wake of retailer bank- ruptcies and closures, he says. "Malls and shopping centers tend to be in high-traffic locations," Sylvester said. "That makes them potentially attrac- tive sites for repurposing as self-stor- age facilities." Over the past decade or so, the self-storage sector has transitioned from focusing primarily on far-flung industrial areas to opening more locations in dense commercial dis- tricts, according to Kate Spencer, a Cushman & Wakefield managing director and co-leader of the firm's self-storage practice. The shift coin- cided with a development boom for the industry that, according to some analysts, may soon reach a plateau. In the race for space, self-storage retailers have proved willing to alter their prototypes to squeeze onto smaller parcels in densely populated markets. Of course, this has broad- ened the types and sizes of retail properties they are willing to consider as possible sites, Spencer says. "We've really started to see more vertical storage facilities on smaller parcels of land — generally, from one and a half to two acres," she said. "These are in prime retail locations." This willing- ness to go vertical happens to mean that multilevel anchor boxes are now a potential fit for self-storage users, unlike in eras past. Generally speaking, self-storage developers need a minimum of about 50,000 to 70,000 square feet to turn a profit, Spencer says. Their parking requirements are minimal. For exam- ple, one 195,000-square-foot self-stor- age facility in the Dallas–Fort Worth market has just 16 spaces, Spencer notes. These dynamics reduce the likelihood of parking-related clashes between self-storage operators and any adjacent retailers at the property. The key thing for landlords to understand, Spencer says, is that self-storage tenants buy buildings, or portions of them, rather than sign leas- es and pay rent. Typically, individual investors and developers own these businesses, and third-party managers with the expertise and the economies of scale that come with maintaining national portfolios operate them. Among the top names are CubeSmart, Extra Space Storage and Life Storage. When it comes to site-selection, self-storage operators generally focus on trade areas of within three to five miles of suburban locations. In addi- tion to scrutinizing population den- sity and average household income in these areas, they like to see a lot of nearby renters. "The higher the per- centage of renters, the better," Spencer said. "The thinking is that people who are renting don't generally have the space in their own homes for all of their stuff. And when you're renting and need more storage, it's cheaper to rent a storage facility than to try to find a bigger place." n T H E C O M M O N A R E A R E D E V E L O P M E N T FROM STORES TO STORAGE Vacant retail sites are often ideally located for self-storage facilities By Joel Groover

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