Some CT Communities Put Storage Facilities on Pause

September 30, 2019
Gregory Seay, News Editor, Hartford Business Journal

Self-storage facilities, a development staple nationwide in recent years amid shrinking household spaces and limited realty-investment opportunities, are losing luster with some Connecticut communities.

Wethersfield, one of the state’s oldest settlements whose pool of developable acreage has shrunk considerably over decades, Sept. 11 imposed a 180-day, extendable moratorium on new applications for self-storage units within its borders.

That followed a similar ban Milford imposed last December to allow it to update its land-use ordinance so that future self-storage facilities are restricted to a specific zone.

The city of Hartford has also amended in recent years its zoning to limit new storage facilities to industrial zones, after a multi-story one was erected next to I-84, in the city’s historic Parkville neighborhood.

New York City several years ago also restricted storage facilities to certain zones, while Birmingham, Ala., has a stay underway as it reviews self-storage zoning.

Municipal officials leading the self-storage pushback say they are concerned about the number of facilities popping up, the amount of space they are taking in an already densely populated and developed state, and the limited economic impact they have both in terms of the number of jobs they create and nearby development they spur.

“We want Hartford to be an equitable, thriving, vibrant and sustainable city,’’ said Sara Bronin, chair of the city’s Planning & Zoning Commission. “Self-storage facilities don’t help us achieve any of those goals.”

Bronin said Wethersfield and Milford are taking reasonable steps because storage facilities “do little to contribute to urban vitality.”

Meanwhile, regional self-storage operators acknowledge siting concerns are increasing even as demand for their products-services continues to grow, not just from homeowners short on closet space, but businesses and municipalities in need of short- or long-term storage for equipment and inventory. The industry estimates one in 10 U.S. households uses self storage at some point.

“This is a demand-fed business,’’ says Charlie Fritts, secretary-treasurer of the Northeast Self Storage Association, whose Buffalo, N.Y., company operates 14,000 self-storage units from Maine to New York, including some 300 in Bridgeport. “You wouldn’t build it unless you were sure somebody was going to rent it. … People just have a lot of stuff they don’t want to get rid of.’’

Wethersfield Town Planner Peter Gillespie said local land-use officials felt the town “was saturated’’ with storage facilities so they ordered “to see what we want to do or not do’’ with them.

Gillespie said this is Wethersfield’s first development moratorium in his 14 years with the town. The ban runs through March and can be extended up to another six months, he said.

Growing demand

Decisions as to where, when and how real estate — residential, commercial and public — within communities’ borders is used or developed has long been the province of local leaders.

When the Great Recession hit in 2008, most commercial and residential real estate grounded to a halt. Residential, in particular, was hit with the extra whammy of a dramatic drop in house values and subsequent climb in foreclosures in most of the nation due to the subprime-lending crisis.

Homeowners who bought at the peak but later could not afford their dwellings after losing jobs or unable to sell, surrendered the keys voluntarily or through foreclosure.

As a result, need grew for rented apartments and townhomes, typically smaller and with less storage space than the single-family dwellings they abandoned. That surge coincided with the desire for aging Baby Boomers and empty-nesters to downsize.

So, developers, many flush with capital from investors eager for the next new thing, or at least a steady realty-income stream, stepped in to build storage facilities in urban and suburban markets.

For example, Extra Space Storage, one of America’s largest operators, partnered with a New Jersey self-storage developer to erect two years ago a multi-story storage building at 31 Pope Park Highway, at Park Street, in Hartford’s Parkville neighborhood. It was designed to resemble an earlier, office-to-storage conversion next door.

In Bristol four years ago, Los Angeles investor DealPoint Merrill LLC paid $2 million for a mothballed Shaw’s supermarket at 1045 W. Main St., that it converted to self storage as part of a trend of converting former “big-box’’ retail sites to storage.

According to Marcus & Millichap’s 2019 Connecticut self-storage market report, developers delivered nearly 730,000 square feet of storage space over the last year. In 2018, the region’s self-storage inventory grew by more than 1 million square feet, Marcus & Millichap said. They forecast just 623,800 square feet of storage will be built in this state in 2019.

Completions, M&M said, remain historically elevated in 2019, with the bulk of construction concentrated in suburban Hartford.

M&M’s report also said ongoing storage development has pushed unit vacancies in the New Haven-Fairfield County area to a six-year high of 9.8 percent.

Storage appeal

It’s easy to see why communities and users initially found self-storage facilities appealing. With few infrastructure needs beyond walls, lighting and a door, they are relatively cheap to erect and operate. They also generate property taxes, but unlike residences, self-storage facilities require minimal town services and do not burden local schools.

In communities with strict rules against extended curbside or driveway parking of oversized or off-road vehicles, some storage facilities offer outdoor lots large enough to accommodate them as well as off-road vehicles, boats and trailers.

“Nobody wants to see a 30-foot camper parked in a driveway all winter,’’ said Fritts, who is president of Storage Investment Management Inc. (SIMI).

But their appeal is dimming amid questions about their relative economic-development value to communities, said Julie Nash, Milford’s director of economic and community development.

Milford and other communities nationwide are realizing that self-storage facilities are not always the highest and best use of land, especially undeveloped acreage, within their borders.

This shoreline community of 53,000 was growing inundated with storage facilities, and Milford had gotten word more may be coming, Nash said.

Nash said she calculated that Milford harbored enough self storage for more than every resident to rent, based on the industry standard of roughly seven square feet per capita.

“There was a proliferation of storage units going up,” Nash said. “They are valuable spaces, but they don’t contribute jobs. We need to make sure we’re making the best use of our land.’’

Milford’s location off I-95, between New Haven and Bridgeport — two cities with little developable acreage — make it attractive even to shoreline residents living outside Milford to use the town as their personal closet, observers say.

Fritts said SIMI’s Bridgeport storage facility benefits from New York City clients who come long-distance to pay suburban Connecticut storage fees that average 40 percent less than the Big Apple’s. Typical storage users live less than four to five miles, or within 15 minutes, of one, he said.

“We want people to come in,’’ Milford’s Nash said, “but we don’t want to be a dumping ground for their stuff.’’

Michael Legacki, acquisition manager for The Hampshire Cos., the diversified New Jersey landlord/owner of Parkville’s Extra Space Storage, said his company deems Milford’s self-storage market overbuilt and won’t operate there.

Legacki said he welcomes communities’ extra scrutiny of his industry, which he says has too many players and investors chasing too few salient development opportunities.

Still, he defends self storage “as a huge positive for communities,’’ claiming that nationally most storage facilities consistently have occupancy rates above 90 percent.

“Clearly, it’s a service the community needs,’’ Legacki said.

Fritts also countered criticism that self-storage centers don’t contribute meaningful economic development and jobs in a community.

“I don’t think that’s fair,’’ he said. “We pay real estate taxes like everybody else.”

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