This new self-storage facility in Allentown, Pa., used to be a Kmart.
During its long history, Oak Brook, Ill.-based Inland Real Estate Group has successfully owned and managed hundreds of millions of square feet of properties in 49 states by keeping on top of industry trends. Recently, its Inland Private Capital Corporation (IPC) partnered with Devon Self Storage Holdings to develop self-storage facilities, often taking advantage of sites abandoned by longtime retail anchors.
In January, the partnership opened its third facility—a conversion of a former Kmart in Allentown, Penn. With seven more underway, we asked IPC’s CEO Keith Lampi how and where self-storage facilities can work as stand-in anchors.
The good thing about self-storage anchors is that they don’t require much parking because renters don’t show up often. The bad thing is…renters don’t show up often, so they’re not big traffic-builders. What are some of the tenant considerations and local market conditions you bear in mind when doing such a conversion?
One of the main drivers with retail conversions is their location. They’re typically in highly visible and high-traffic areas, which bodes well for rents and occupancy rates. Even though the space is going from retail to self-storage, you still have to appeal to customers. They’re looking for visibility and accessibility. Our most recent opportunity fund included 10 self-storage conversions, one of which was in Racine, Wisconsin. Racine was undersupplied and this facility brought 765 self-storage units to the area. Our approach is really anchored in demographics and demand.
Inland's Keith Lampi
Do you make the self-storage facility part of the center? Or is it sequestered with its own parking and boundaries so as to not seem part of the center?
The sites typically keep their overall footprint. Some are part of a center and some--like our conversion in Allentown--are freestanding. In some instances, the entire lot is converted to self-storage through ground-up development. In other instances, if a larger unit count is not supported by market demand, out-lot sales are considered. Another investor can purchase the undeveloped land and open a retail or restaurant business. Some municipalities require we add green space, which enhances and adds a visual element to both the property and community.
In the case of Allentown, what are some of the positives that a self-storage facility brings to retail tenants of the center?
We’ve consistently seen a need for self-storage facilities and this is partly attributed to the “Four D’s” – death, divorce, dislocation, and downsizing. The decline of big box retailers has provided the opportunity to convert large scale facilities into a number of smaller self-storage units to meet this demand. We are redeveloping a vacant structure, which in many instances has sat vacant for a long time.
From an aesthetic and community standpoint, operating storage is far better for surrounding businesses than vacant retail, which can attract vandalism and the general perception of a depressed market. Cleaning up and converting a site into a sustainable, thriving business not only fills a commercial vacancy, it also provides a number of economic benefits through development and employment.