5 Red Flags in a Self Storage Feasibility Study (And What They Mean for Your Investment)

You've found a promising site. You commissioned a feasibility study. It came back positive with strong projected returns. Everything looks great on paper.

But here's what most developers don't realize: not all feasibility studies reflect current market reality. Some are based on outdated assumptions from the 2020-2022 boom years. Others are overly optimistic to justify moving forward. And a few simply miss critical market dynamics that could sink your project.

After conducting feasibility studies nationwide for over 30 years, we've reviewed hundreds of analyses from other firms — and we've seen the same problematic patterns appear again and again. These red flags don't just indicate a weak study. They can lead to multi-million dollar mistakes.

In this guide, we'll walk through the five most common red flags in self-storage feasibility studies — what they look like, why they matter, and what realistic 2026 projections should show instead.

What You'll See in the Study

"The facility is projected to reach 96% occupancy by month 18 and maintain 97% stabilized occupancy."

Why This Is Problematic

Sustaining 97% occupancy sounds great — but it's unrealistic for most markets in 2026. Even exceptionally well-managed facilities in strong markets rarely maintain occupancy above 95% over time.

The reality is that every storage facility experiences natural occupancy fluctuation. Customers move, downsize, or stop needing storage. Some unit types are always harder to rent than others. Seasonal demand varies, and competition creates pricing pressure that can impact occupancy.

Across the facilities we manage in Ohio, Indiana, and Maryland — which represent diverse market conditions and professional operations — our long-term average occupancy runs between 90% and 94%. We've hit 96% during peak seasons, but sustaining that level year-round just doesn't happen in normal market conditions.

The Financial Impact

The difference between a 97% projection and 92% reality adds up quickly.

On a 500-unit facility averaging $120 per month, that 5-point gap means 25 empty units — costing $36,000 per year in lost revenue. Over a 10-year period at a 7% cap rate, that's over $500,000 in lost property value.

What Realistic Projections Look Like

Conservative stabilized occupancy for 2026:

• Strong primary markets: 92-95%

• Secondary markets: 89-92%

• Competitive or tertiary markets: 87-90%

If your feasibility study shows stabilized occupancy above 95%, ask the analyst how they arrived at that number — and request comparable facility data supporting it.

What You'll See in the Study

"The facility will achieve 40% occupancy by month 6, 75% by month 12, and 90% by month 18."

Why This Is Problematic

This timeline reflects 2021-2022 market conditions — when self-storage was experiencing unprecedented demand during the pandemic boom. It doesn't reflect how lease-up will actually work in today's more competitive environment.

The development surge of 2021-2023 delivered significant new supply across most markets. Customers now have more choices. Marketing takes longer to gain traction, and absorption rates have slowed across the industry.

Recent facilities we've analyzed in competitive Midwest markets are taking 24-30 months to reach 85-90% occupancy — not 18 months. That's an extra year of operating losses that need to be funded.  We are basing this lease-up on a 60,000-70,000sf self-storage facility.  If smaller, the lease-up can be quicker depending on the market.

The Financial Impact

Slower lease-ups require more working capital and delayed returns.

A 500-unit facility projecting a $100 per month average rent:

• Optimistic timeline: Month 12 = 375 units = $450,000 annual revenue

• Realistic 2026 timeline: Month 12 = 250 units = $300,000 annual revenue

This $150,000 first-year shortfall compounds into higher total losses before stabilization — and often catches developers without reserves.

What Realistic Projections Look Like

Conservative lease-up for a competitive 2026 markets:

(Example: 70,000 sqft project)

• Month 6: 20-25%

• Month 12: 45-50%

• Month 18: 65-70%

• Month 24: 80-85%

• Month 30: 90-92%

Markets with less competition or stronger demand drivers may lease up faster — but assuming 75%+ occupancy in year one is risky unless you have strong local data supporting it.

What You'll See in the Study

"Annual rental rate increases of 6% are projected throughout the stabilization period."

Why This Is Problematic

A 6% annual growth rate might have been realistic during 2020-2023. It's not realistic for most markets in 2026.

The pandemic-era boom created unusual pricing power. Demand exceeded supply, operators could push rates aggressively, and customers had limited alternatives. That dynamic has normalized. Today's markets are more competitive, customers are more rate-sensitive, and pricing power has moderated.

Across our managed portfolio, we're seeing realistic rate growth of 4%+ annually in mature markets — closer to inflation than the exceptional growth rates of recent years.

The Financial Impact

Rate growth assumptions compound over time, creating significant long-term projection errors.

A 500-unit facility starting at $100 per month average:

At 6% annual growth:

• Year 5: $133.82 per unit = $802,920 annual revenue

At 4% annual growth:

• Year 5: $121.67 per unit = $730,202 annual revenue

That's a $72,900 annual difference in year five — and it grows every year after. By year 10, you're looking at $186,000+ in annual revenue variance, which directly impacts property value at exit.

What Realistic Projections Look Like

Conservative rate growth for 2026:

(Example: 70,000 sqft project)

• Years 1-2 (lease-up): 0-2% blended average

• Years 3-5 (stabilization): 3-4% blended average

• Years 6-10 (maturity): 4%+ annually

Markets with unique demand drivers or limited competition may support higher growth — but 5-6% sustained growth should be questioned and justified with comparable market data.

What You'll See in the Study

"Operating expenses are projected at 30% of revenue, consistent with industry standards."

Why This Is Problematic

30% might have been a realistic operating expense ratio in 2020. It's not as realistic in 2026 — especially for new facilities.

Several major expense categories have increased dramatically over the past few years:

Property insurance has seen a 50-100% increase in many markets so it’s important to have this quoted prior to developing a new project.   

Property taxes post-development are often higher than initial projections, particularly once the facility is completed and generating revenue.

Technology and marketing costs that weren't standard five years ago are now essential — property management software, security systems, digital marketing, and online presence all require ongoing investment.

Across our current managed facilities, we're seeing operating expense ratios of 38-42% depending on the property size, market, and specific circumstances.

The Financial Impact

Underestimating expenses directly reduces net operating income and property value.

On a facility projecting $800,000 in annual revenue:

• 30% expenses = $240,000 = $560,000 NOI

• 42% expenses = $336,000  = $464,000 NOI

That $96,000 NOI difference translates to over $1.3 million in property value at a 7% cap rate.

What Realistic Projections Look Like

Conservative operating expense assumptions for 2026:

(Example: 70,000 sqft project)

• Well-managed facility: 38-42% of revenue

• Mismanaged facilities can far exceed a well-managed facility 

Key expense categories to verify: property insurance quotes (recent, not 2-3 years old), property tax projections (post-development, not pre-development), adequate marketing budget (3-5% of revenue), and technology/software costs.

What You'll See in the Study

"There are currently 5 self storage facilities within a 3-mile radius totaling 285,000 square feet."

What's Missing

Analysis of current supply is important — but it's only half the picture. The critical missing piece is what's coming.

Projects under construction, facilities that have been approved but not yet started, and developments in the planning stages all represent future competition that will impact your project's performance, and this pipeline supply is often invisible without dedicated local research.

Why This Is Problematic

We recently analyzed a market for a client where current supply looked attractive — four existing facilities averaging over 90% occupancy with strong rates. But when we researched the pipeline, we found three projects in various stages of development representing 280,000 square feet of new supply — more than double the existing market.

Our recommendation was to wait or look elsewhere. A year later, two of those projects opened and market occupancy dropped from 91% to 78%. The developer thanked us for saving him from what would have been a struggling asset.

The Financial Impact

Building into unrecognized oversupply means slower lease-ups, lower achieved rates, and significantly reduced returns. A project that pencils well against current competition may fail when 200,000+ square feet of new supply opens nearby during your critical lease-up period.

What Realistic Analysis Looks Like

A thorough feasibility study should include:

• Projects under construction 

• Entitled projects (approved but not started)

• Projects in planning (if discoverable through local sources)

• Estimated timeline analysis (when supply hits market)

• Impact assessment (how it affects your absorption and rates)

This requires boots-on-the-ground research — driving markets, checking permit databases, talking to planning departments, and leveraging industry relationships. It's work that generic online research won't capture.

Seeing one of these red flags doesn't necessarily mean your feasibility study is fatally flawed. But if you spot three or more, it's worth getting a second opinion before committing millions to development.

The cost of quality feasibility analysis is modest relative to total project costs. The cost of building based on unrealistic projections is dramatically higher.

Questions to Ask About Your Study

If you're concerned about your feasibility analysis, start by asking:

• When was this market data collected? (Anything over 6-12 months old may be outdated)

• What comparable lease-ups support the timeline projections?

• Where do the operating expense assumptions come from?

• How was future competitive supply researched?

• What sensitivity analysis was performed?

Good analysts will have detailed answers. Weak analysts will give vague responses or defensive reactions.

When hiring a firm to analyze your potential development, prioritize those with:

Recent operational experience — firms that have actually managed facilities understand market realities in ways pure analysts may not

Conservative methodology — realistic projections are more valuable than optimistic ones

In-person research — visiting sites and competitors provides insights that online research misses

Transparent assumptions — every projection should be documented and justified

Client references — recent clients can speak to the accuracy and quality

At ACM, our feasibility studies combine 35+ years of operational experience with thorough market research nationwide. We visit every site and competitor in-person. We use conservative assumptions based on current market realities, not outdated boom-year data. And we'll tell you "no" when a project doesn't make sense — because your success matters.