Strategy Highlight: Repurposing Retail to Self-Storage


When thinking about private equity real estate investments, many investors imagine shiny, Class-A office buildings and architecturally interesting, ground-up retail development. But in considering the long-term value and consistency of investment opportunities during economic uncertainly, we believe it is beneficial for many investors to consider more “alternative” asset classes.

Enter retail-to-self-storage repurposing.

Why Repurpose?

Fairway’s focus on repurposing retail properties into self-storage facilities has two key motivating factors. First, we have determined the economics of repurposing properties is often better than ground-up development. And since many of the targeted properties have been vacant for a significant period, they can essentially be acquired for close to land value. Second, due to the in-fill retail locations of many of the assets, competition may be lower than in more suburban areas where recent development has saturated the market.

What geographic areas make the most sense?

The self-storage industry reached a peak in 2018 when an unprecedented 67 million square feet of self-storage space saturated the market* on a macro level. But since we generally classify storage as a “three-mile business,” the macro supply does not significantly impact our strategy.

Fairway typically looks for undersupplied, in-fill markets that have seen sparse new development of Class-A storage facilities. In keeping with our value-investing mindset, we consider each opportunity based on its specific metrics.

In general, we prefer more urban sites where the threat of new supply is much lower because of zoning requirements, but suburban sites can also be great opportunities if there are strong demographics and few competitors. That said, most of our projects have been in Top-50 Midwest cities such as Cleveland, Detroit and St. Louis.

What are the biggest challenges to retail-to-self-storage conversion?

One of the biggest hurdles to overcome is zoning. Some cities have been reluctant to abandon the potential future sales tax revenue that a retail building can produce – even if it has sat vacant for years and will likely never be a viable retail property. However, this isn’t always the case, as some city councils do see the upside of repurposing vacant property. It really depends on the mindset of each municipality.

How does the self-storage business fare during economic recession?

Economic downturn can trigger increases in moving, downsizing, relocating, etc. – all catalysts for an increase in self-storage demand. That, combined with a large and aging millennial generation entering their primary income-earning years, actually may drives stable demand for self-storage regardless of economic conditions.

However, retail-to-self-storage investments involve risks. These risks include, but are not limited to, illiquidity, potential loss of the entire investment, and the possible failure to successfully implement the business plan.

In conclusion…

We believe self-storage conversions are here to stay. While they may not be as “shiny” as, say, ground-up retail or hospitality development, we believe they shouldn’t be overlooked as an investment consideration.

About the Author:

As Vice President of Investments, Barry Johnson leads real estate due diligence and valuation at Fairway. Prior to his role as Vice President, Barry was Fairway’s Senior Portfolio Manager, and acted as a Director at Integra Realty Resources. Barry holds an MBA from University of Denver and the two most advanced real estate appraisal designations, MAI (Member Appraisal Institute) and SRA (Senior Residential Appraiser), as well as the highly coveted CCIM (Commercial Investment Member).

Disclaimer: All information provided herein is for informational purposes only and should not be relied upon to make an investment decision and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Nothing contained herein constitutes investment, legal, tax or other advice nor is it to be relied on in making an investment or other decision. Readers are recommended to consult with a financial adviser, attorney, accountant, and any other professional that can help you understand and assess the risks associated with any investment opportunity. Private investments are highly illiquid and are not suitable for all investors.

*Source:,-not-spectacular,-self-storage-year-on-the-way-20200203 – Last accessed February 5, 2020

About Fairway America

Fairway America is a leading alternative investments manager focused on middle market commercial real estate. Established in 1992, the company specialize in real estate credit and private equity strategies on behalf of individual and institutional investors. As of Q1 2022, the firm manages more than $315 million of investor capital and a portfolio of assets representing more than $2.2 billion in gross asset value across several major property types. For additional information, visit

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