Why Connecticut has seen a surge in self-storage facilities: ‘It’s a growing business’

CTPost – December 28, 2023 By Liese Klein

Property values, safety, “visual impact,” traffic and flooding were among the concerns aired earlier this fall about a proposed self-storage facility in Old Lyme — not to mention the potential presence of hazardous materials, runoff and the size, scale and design of the project.

Old Lyme officials will decide in January on the controversial self-storage proposal, which if approved would be the third such facility on a stretch of Shore Road near million-dollar homes and the town’s iconic Soundview Beach.

But a range of other self-storage projects have been approved with little fanfare across the state in recent months, as towns seek low-impact development and Connecticut residents continue to acquire more stuff.

“It’s a growing business,” said Michael Goman, an East Hartford-based expert on commercial property widely consulted by Connecticut towns and cities on economic development.

“It used to be that self-storage development was seen as the transitional development between raw land and eventually building an apartment building or an office or retail project,” Goman said. “Now, that’s all changed.”

Post-pandemic, towns and cities are looking for broader tax bases and most have pulled back on moratoriums on new self-storage projects. Self-storage developers have also made their projects more attractive to towns by limiting their footprint and upscaling design.

Typical of the new wave of self-storage developments is a project planned for a Berlin Turnpike property straddling the Wethersfield-Newington border, a three-story “stack-n-store” with a modernist facade that looks more like a luxury apartment building than a storage complex. With nearly 100,000 square feet of storage housed in a red-and-gray, climate-controlled building, the project won approval from both towns earlier this year.

“The industry has changed from a cheap sort of steel garage, very simple, unheated, unlighted, very low-cost buildings, to multistory, climate-controlled, very secure lighted storage,” Goman said.

With these updated designs in hand, developers —  many backed by private equity and real estate investment trusts — can make a strong case to town officials that a self-storage facility is an attractive and low-impact use for vacant or redeveloped land.

“They’re beautiful,” Goman said of newer developments. “They look like an upscale office building. If you were to drive by them, you wouldn’t have any idea that it’s a storage facility.”

From offices to self-storage

One new frontier for self-storage developers is vacant office buildings, especially the 1980s-vintage smaller structures in the suburbs that would be costly to retrofit to modern standards. Amid a nationwide and regional surge in office vacancy, more towns are looking for alternatives to empty and decaying buildings.

“(Two) vacant buildings ready for immediate conversion to self storage” reads a listing on commercial real estate site LoopNet, touting the “fantastic exposure to I-91” offered by a pair of former office buildings in Windsor. Totaling 97,256 square feet, the structures are on sale for $6.9 million.

“If you’re sitting on a three- or four-story suburban office building… it’s virtually impossible to make it financially make sense to convert it to a modern office,” Goman said of the region’s large inventory of older structures. “At least one of the viable alternatives is climate-controlled storage.”

Storage facilities bring relatively little traffic and don’t need much in terms of public services, nor do they add children to the schools. And office buildings that sit empty for too long will likely require demolition, a major expense for a town.

“If it involves the conversion of an existing office building, they would rather see it used for storage than sitting vacant,” Gorman said. Shopping malls, facing record vacancies amid shifts to e-commerce, are also a potential site for future storage.

The last holdouts against self-storage expansion are Connecticut’s larger cities, where officials often cite the need for more housing or development that creates more jobs in turning away developers. (A typical storage facility employs only a handful of people at most.)

Bridgeport officials this summer rejected a plan to convert a former Stop & Shop in the city’s North End, with opponents citing alternate uses including senior housing.

Danbury officials, however, approved two new self-storage facilities in the city’s east end in October — after developers upgraded the designs to make them more attractive by eliminating roll-up doors and chain-link fencing. A boom in condo and apartment construction in Danbury has increased demand for storage and sparked multiple new projects across the city.

Housing trends boost storage demand

New apartment construction and the stalled housing market due to high interest rates are contributing to demand for storage in the region, said  Charlie Fritts, president of the Northeast Self Storage Association. The group held its annual expo at Foxwoods this year and represents 350 self-storage operators in Connecticut, Massachusetts and Rhode Island.

“Storage has done phenomenally well,” Fritts said. “Most of the markets still have room for additional storage.” People need more storage when they can’t move from apartments to a house or are stuck in a smaller home.

High interest rates and construction costs have slowed some growth in the sector, Fritts said, but projects that were in the pipeline continue to move forward across the region as consumers push for more storage options.

“I think the developers are much more cautious now than they were maybe before the pandemic to really do the studies and make sure that the demand is there before they invest those kinds of dollars,” Fritts said.

Storage businesses are highly local and tend to draw customers from only about a 1-mile radius in urban areas and a 10-mile radius in rural areas, Fritts said. So a single town could contain “storage deserts” without access to convenient facilities and high demand.

Even with homeowners and apartment dwellers stashing away more furniture, seasonal items and other goods, small businesses like contractors remain the largest clients for self-storage and prefer facilities with access to major highways, Fritts said, fueling additional development.

Trends favor bigger chains

Although many mom-and-pop operators remain in the storage business, growing trends in the industry include consolidation led by chains like Extra Space, Public Storage and CubeSmart. Regional operators like New York-based Prime Storage are also growing, fueled by real estate investment trust capital.

“A lot of regional players now all across the country are just acquiring, and there’s a lot of investment money that people want to invest in storage,” Fritts said.

Another trend is “remote operation,” in which a single manager runs multiple facilities through technology. Customers walk in and interact with a manager on a monitor or arrange access to their unit entirely online.

“It’s really helpful for the smaller properties where they can’t justify the cost of having a full-time person in the office because it just doesn’t generate enough income,” Fritts said.

“Valet storage” companies are also growing, a higher-end niche that allows users to get their belongings out of storage through an online system and get them delivered to their doorstep.

The main growth in the industry is in climate-controlled facilities like the Wethersfield/Newington project, reflecting the wider use of storage for a range of belongings and heightened customer expectations that their goods will be kept in pristine condition.

Large chains can spend the money to draft attractive designs for these newer storage facilities to win over town officials, Fritts added.

“I think the developers are now understanding that when they put up a property they have to do it can look aesthetic to make people in the town happy,” Fritts said. “They don’t want to just see a big old warehouse that’s functional but ugly.”