Other cities want less self-storage. Philadelphia can't get enough of it

PHILADELPHIA — On a windblown stretch of the Delaware riverfront in late September, an array of local leaders lined up to praise a new use for Pier 40.

After sitting derelict for years, the monumental Beaux-Arts remnant of Philadelphia’s industrial history was sold to PrimeSpace Capital, and the New York-based developer refurbished its faded exterior and transformed the interior into the city’s latest self-storage facility.

“This use pays homage to its industrial past,” said Bart Blatstein, one of Philadelphia’s best-known developers who sold the property to PrimeSpace. “It’s a great service for the community.”

The new self-storage depot in this 180,200-square-foot historic building is the latest addition to a business that has exploded in Philadelphia over the last five years. While other cities have moved to restrict self-storage, Philly has seen at least two dozen open just since 2020.

Consumer purchases boomed during the pandemic, even as home offices ate into available space. At the same time, rising interest rates and a housing shortage — especially in the suburbs — made moving to a larger home harder for many families. Self-storage developers rushed to meet the demand.

“In this less affordable [housing] environment that we’re in, storage is getting used more than what we’ve seen in the past,” said Nick Walker, vice chairman of real estate services firm CBRE’s self-storage arm. “Maybe they have a second kid in their starter apartment, but upgrading to that third bedroom from a two-bedroom is very expensive. Storage is a much cheaper alternative.”

The self-storage industry has grown in areas that City Council zoned for industrial development in a vain effort to attract job-rich businesses, including in former manufacturing hubs near burgeoning residential populations like Washington Avenue in South Philadelphia or North American Street in Kensington.

Some observers say Philadelphia is now seeing an oversupply of storage space in areas near the I-95 corridor or in the Northeast, where residential growth is strong and industrial zoning abundant. Even so, blank-walled storage centers are opening on commercial corridors across the city.

Now developers are eyeing land in neighborhoods like University City, parts of South Philly, and the Northwest because storage facilities mostly serve consumers in their immediate surroundings. Those areas tend to have less accommodating land-use regulations.

“Any place that is having population coming in, that’s where we see the new supply popping up,” said Matthew Lang, Philadelphia-based president of North Carolina’s Go Store It Self-Storage. “There are these pockets within the city limits that are undersupplied, but it’s difficult given the zoning regulations.”

Why so much self-storage?

The self-storage industry emerged in the 1970s, as the cost of consumer goods plummeted. Recent years have seen increased interest from older Americans downsizing their homes but unwilling to part with their possessions and younger households unable to afford more space.

During the pandemic, the industry experienced a boom as more households moved and shifted spending to goods rather than services. Development was also accelerated by lower commercial interest rates.

Self-storage customers want to travel a maximum of five miles to access a storage site, industry leaders say. In dense urban areas, facilities draw from a radius less than half that.

“We as American are hoarders, we buy everything on Black Friday, and we don’t really need it, so we have to have a place to store it,” said Israel Friedman, director of PrimeSpace Capital. “It is an actual need, and with the amount of apartments going up, people want a storage facility nearby.”

One of the largest companies, Extra Space Storage, estimates that over 50% of their customers use storage facilities when they are moving or experiencing a major life event like going to college or the military. A further 40% use it as longer-term additional space outside the home. Most of the rest of demand comes from business owners.

Industry data compiled this year by StorageCafe, an online self-storage search portal, recorded 82 such facilities in Philadelphia, spanning some 6.7 million square feet of developed space. At least five more facilities were set to open in 2024 — or already have — adding another half-million square feet of storage.

Self-storage and its discontents

Nationally, the growth of the self-storage business engendered backlash in some urban areas.

Denver banned the facilities within a quarter mile of light rail lines in 2019, in a bid to encourage residential development near transit, while Miami regulated how close they can be built to one another. New York City shut them out of areas zoned for industrial-usage in an effort to preserve space for job-creating businesses, while Providence, Rhode Island, banned any new self-storage in 2023. Organizers in the Rhode Island city saw storage facilities as cannibalizing scarce land that could be better used for housing.

Providence City Council member Miguel Sanchez helped pass the ban after a developer turned an 11-acre site in the city into a one-story storage center. He says the facilities consumed large amounts of scarce urban real estate while offering minimal economic benefits.

“We don’t need more storage facilities. We need more housing and grocery stores,” he said. “Our tagline was, ‘We want to house people, not things.’”

Philadelphia has seen occasional local controversies. In 2018 a developer tried to build a self-storage complex a block from the Broad Street subway.

That case emphasized the challenge the industry faces when seeking to move into areas not zoned for industrial development. Although the developer was able to secure permission to move forward from the Zoning Board of Adjustment, the local neighborhood group, Councilmember Mark Squilla, and then-Mayor Jim Kenney’s administration all objected to a storage facility so close to a subway station.

The city sued its own zoning board to reverse its decision, and the site was later redeveloped as apartments. Some say that was a sign of the system working.

“They’re not allowed in most of the city,” said Eli Storch, chair of the Design Advocacy Group, an architecture industry trade group. “Our zoning code in this case does what it’s meant to do, which is keep this kind of antiurban use away from neighborhoods and commercial centers.”

But neighborhood groups like South Kensington Community Partners are still concerned that self-storage facilities and their often featureless ground floors make neighborhoods feel unsafe, employ few workers, and generate little foot traffic.

The abundant industrial zoning along North American Street, which largely hasn’t attracted job-rich factories or warehouses, means the neighborhood will likely see more self-storage.

“The more that these facilities are allowed to be built in spaces like this, the more they bring,” said Allison Carafa, who sits on South Kensington Community Partners’ zoning committee. “These buildings conform to the existing zoning, but it’s not what the neighborhood is currently trying to be.”

For developers like Friedman of PrimeSpace Capital, however, the lack of political pushback makes Philadelphia an attractive place to build more self-storage.

There is plenty of appetite, especially away from the more saturated corners of the market, and both of the projects the company has developed in the city have been on industrially zoned land. At Pier 40, Friedman was lauded by historic preservationists for saving the building.

Friedman says he has his eye on two more properties in Philadelphia for new storage facilities.

“Philadelphia is an area I really enjoy working in,” he said. “The community, the developers, and everyone just works great together. We develop throughout the country, and I can’t say I see that in every municipality.”