As self-storage overbuilds in Nampa, one small business is feeling the competition
Build houses here — apartments even, says Nampa’s City Council. But no more self-storage units.
With the Treasure Valley’s housing boom has come more furniture, more knick-knacks and more clutter — and a need for more places to store it. But some industry leaders say Boise’s market has become oversaturated with self-storage units. They warn that if cities don’t take action, they could face an abundance of vacant and deteriorating storage buildings.
Nampa in particular has unwittingly become a hub for these glorified closets: In the last two years, 18 new storage unit businesses have applied for development permits. Nampa’s planning and zoning staff receives an average of one inquiry every day from developers interested in building storage.
After local businesses and city planners raised the issue, the City Council voted Monday to enact an emergency moratorium, preventing the city from issuing any new permits for storage units for the next six months. State law allows cities to enact emergency moratoriums in the face of an “imminent peril to the public health, safety, or welfare.”
“If we continue to develop at the pace they’re coming in, we’re going to be overbuilt,” Mayor Debbie Kling told the council.
Richard Bird, the executive managing partner of The Yellowstone Group, a commercial real estate firm, agrees. He advises investors about buying income-generating properties, including self-storage.
“As supply goes up, rents go down. It’s the existing owners that get hurt,” Bird said in an interview. “To protect your existing tax base, it’s important to identify whether there’s a true need for storage.”
Protection is what small-business owners Rosemary and Richard Nelson want from the city. Two years ago, the couple moved to Nampa from Southern California and bought an existing self-storage business, Karcher Storage, near the intersection of Karcher and Middleton roads. They spent $60,000 to renovate the 153 units, built over 30 years ago.
Within a year, another self-storage business went up less than a mile away. Then in May, the couple learned that a new apartment complex directly next door was also making plans for a self-storage business.
Already, the Nelsons’ prices were the lowest in the area. Rosemary Nelson said they can’t afford to reduce them further, even as they’ve seen their vacancy rate increase by 10% over the last year.
“Eventually there are going to be more and more storage facilities and it’s going to kill the whole industry,” Rosemary said in an interview Monday. “The first ones to go are going to be small-business owners like us.”
Self-storage companies need population growth for success, Bird said. Investors reading catchy headlines about the Treasure Valley’s fast growth may be overlooking the actual number of people moving here.
“When Boise and the region get press for being the fastest-growing city in America, and then the city boasts about it, and then everybody local talks about it, that word spreads — and you get national interest in really what’s actually a very small market,” he said.
The Boise metro area, with a population of 710,000, is growing at 3% each year. The actual number of people moving to the region is about 49 people per day, or 18,000 people per year Compare that with Seattle, where the city alone grew by 2.5% from July 2016 to July 2017, adding the same number of people, but to an existing population of 725,000. (Seattle’s metro area is 4 million.)
But for many investors, getting in on Boise’s growth is too tempting of an offer to resist. “There’s so much land, and so much cheap land,” Bird said.
The problem isn’t unique to the Treasure Valley.
Until the industry’s growth exploded, self-storage had remained a steady investment for investors through fluctuations in the economy. Nearly one in 10 households rents a storage unit, according to The SpareFoot, a company that monitors self-storage companies.
But growth has slowed as companies trying to cash in overwhelm the market, according to The Wall Street Journal. Rental prices are declining. A 5-foot-by-10-foot storage unit, the most common size, goes for about $40 a month in Idaho. That’s cheaper than the national average of $65, and the price is sliding, Bird said.
Now some savvy investors are forming real estate investment trusts to buy up under-performing storage companies at a discount, Bird said. It’s not the companies these investors are after — it’s the land.
“Self-storage was originally built as a way to land bank,” he said. “If developers had this land, they could build a cheap self-storage facility, make a little bit of money as they waited for other businesses to come in, and then they could tear it down and put in something more valuable.”
“Highest and best use”
Nampa doesn’t want to attract companies interested only in land-banking. Kling worries these industrial-sized attics are taking up industrial land that could be used for development that would generate greater tax revenue and employment. A self-storage business typically consumes five to seven acres but may employ a single person to manage the property.
“You want to look at the uses that are providing the best long-term use to the community,” Kling said during the council meeting. “Half-vacant storage units don’t benefit the community.”
Rodney Ashby, a principal planner with the city, told the council that he wants to ensure “the land we’re using for storage units is the highest and best use for the land.”
City Councilman Randy Haverfield, an architect whose firm is in the midst of securing building permits for two planned storage units in Nampa, disagrees. He said the storage units still bring value through the tax revenue they generate, even if they employ few people.
Haverfield did not recuse himself from the vote on the moratorium despite his involvement in the two storage unit projects.
He pointed to one of his projects, a new $9 million storage facility . “That’s $9 million of taxable property that the city is receiving ... for nine to 10 acres of ground,” he said. “That seems like pretty good return as far as taxable value.”
What can cities do
Many cities have enacted measures to curb the proliferation of self-storage buildings.
In Miami, self-storage companies must be spaced at least 2,500 feet away from each other in any direction. Charlotte, North Carolina requires that developers reserve the first floor of storage buildings for retail or office space, the New York Times reported. In New York City, developers must apply for a special use permit that can take years to approve.
But in Nampa, where undeveloped and inexpensive land can be found in abundance, developers build horizontally rather than vertically. That has created sprawling structures of inexpensive materials often hidden behind plain concrete fences.
The City Council asked city planners to consider changes to the city’s design code that would encourage higher-quality design and locations away from commercial corridors. The moratorium requires the staff to come up with a solution to the storage situation within 90 days.
Nampa could find models in other Treasure Valley cities.
Kuna, for example, has put in some design standards to mitigate the visual monoliths that storage units produce.
For the six storage businesses already there, Kuna requires landscaping buffers, no-vision fencing, and if they are adjacent to a roadway, curb, gutter and sidewalk improvements, said Economic Development Director Lisa Holland.
And while Nampa still allows storage facilities on land zoned a variety of ways, Kuna’s zoning requirements become more strict as the size of a proposed storage unit increases.
Nampa’s moratorium is in effect for the next 182 days. As city planners try to find a solution, small-business owners like the Nelsons are left stressed about their future.
A year ago Tuesday, Richard and Rosemary were joined by city council members and neighbors as they raised a new flag on their property to memorialize the death of their daughter, Cassie. The flag, and the rock with her name below it, are little mementos that symbolize their stake in the city. Rosemary worries that other businesses owners don’t feel that way.
“If they allow more self-storage, the family businesses are going to be gone,” Rosemary said, standing next to her husband Richard and her son, William James Guerrero, hiding her face to wipe away tears. “All you’re going to have are these big corporations.”
“This is our retirement,” Richard Nelson said. “This could put our company out of business.”