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A Question of Entitlement

Written by: Warner Russell Posted: 2/1/2017
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As the self storage development cycle has accelerated and moved toward maturity, many sites that were ripe for development at the beginning of the cycle have been taken. Many investment-grade properties remain, but site selection requires extreme care as developable land becomes less available. In addition to strong demographic quality and environmental cleanliness, proper entitlement of a site for self storage development is essential to a successful project. Many potential developers are interested in self storage, but lack experience in the sector and therefore struggle with issues of zoning and entitlement for self storage facilities.

Proper zoning for self storage varies across the major MSAs and is determined based on zoning ordinances adopted by municipalities. Sites that are zoned “of right” may be more quickly developed than other sites, but are often located in more industrial areas. While these sites may have little regulatory resistance to quick development and building, such sites could present difficult demographic, safety and/or environmental issues, all important factors in successful development of self storage facilities. In the event a site is not zoned for self storage as a matter of right, a special use permit, zoning variance or change in the zoning ordinance is required for self storage development. This would be a typical situation for a well-located, dense urban infill site. “Re-zoning” by one of these methods is costly and very time consuming.

In addition to evaluating the zoning of a site, a prospective developer should also understand the process for obtaining the various building permits required to develop the site. During this development cycle, we have seen certain building departments use permitting in ways that can delay projects and increase the costs. Developers should get to know building department personnel, properly evaluate (through discussion with building authorities and with similarly situated developers) and understand the time required for permitting before committing to projects too deeply.

As we move later in the development cycle, there is a natural tendency to commit to sites that appear to have the shortest time lag to moving dirt. We caution you that if a projected time to construction appears “too good to be true,” then it probably is. We encourage you to properly vet all sites and engage knowledgeable experts to properly inform you during the process. The money you spend will be well worth it in the end.

In addition to providing development capital to self storage developers, we at Jernigan Capital (JCAP) bring to bear our national experiences and expertise in addressing difficult entitlement issues. If you have any questions for Jernigan Capital about site selection or our loan program, please visit our website: JerniganCapital.com.

 

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