Case Study · Indiana · Self-Storage · SBA 504
Self-Storage Feasibility Study, Indiana — An SBA 504 Worked Case
This is how our independent feasibility study company and consultant team analyzed a new-build climate-controlled self-storage facility underwritten to an SBA 504 credit, from trade-area demand and square feet per capita through the debt-service coverage a lender must document across a multi-year lease-up. It is a representative, anonymized worked example of the methodology — not a specific client deal — set in a growing suburban submarket of a major Indiana metro.
A ground-up climate-controlled store in an Indiana growth ring.
A sponsor came to our feasibility study company with a ground-up self-storage project and an SBA 504 structure that the bank wanted independently tested before it would commit. The subject is a roughly 70,000-square-foot net-rentable, single-story, fully climate-controlled facility of about 560 units on a ~4.5-acre parcel in a growing outer-ring suburban submarket of a major Indiana metro. The unit mix is deliberately weighted toward smaller, higher-rate-per-foot units, the stickier segment of storage demand.
Self-storage is income-producing real estate with an operating overlay, not a going concern: it is underwritten and valued on physical and economic occupancy, achievable rate per square foot, net operating income, and cap rate, which is why the SBA treats an owner-operated facility as an eligible active business rather than passive real estate.9 The lender's question is therefore not what the dirt is worth but whether this specific site leases up and covers this specific loan across the ramp, not only at stabilization.7 A ground-up build with no operating history, run through the Standard track above the $350,000 Small Loan threshold, is precisely the profile that turns a discretionary feasibility study into an expected one.9 Our scope was the independent demand, competition, achievable-rate, and debt-service coverage analysis that supports that credit.
Representative and anonymized. Every figure below is illustrative of a typical engagement of this type; the site, submarket, and parties are composited, not a real named borrower, address, or completed transaction.
Trade-area demand and the square-feet-per-capita gap.
The demand read starts with people, household churn, and the trade-area supply balance, not a street rate applied to a rooftop count. The three-mile ring holds roughly 58,000 residents growing about 1.8 percent a year, against a submarket carrying only about 5.4 net rentable square feet of storage per capita — well below the 7.8-square-foot national average.
Supply is measured in net rentable square feet per capita, and the national average is 7.8 square feet per person as of December 2025; below roughly 6 to 7 reads as undersupply and above roughly 8 to 10 as oversupply, always read alongside occupancy and move-in velocity.24 The subject submarket sits near 5.4 square feet per capita on about 315,000 existing net rentable square feet against roughly 58,000 residents; adding the subject's 70,000 square feet lifts the submarket to about 6.6 square feet per capita — still below the national figure and well under the oversupply band, with a growing population absorbing the new stock. Because moving is the single largest storage-demand driver, the household formation and turnover of a growing suburban ring is the engine here, and household penetration has risen nationally from 8.95 percent of households in 2005 to 12.60 percent in 2024.1 Climate-controlled product now accounts for about 44 percent of demand; the subject is fully climate and small-unit-weighted, aligned with the higher-rate, longer-staying segment.3
Rate is modeled the way an underwriter reads it, not off an advertised headline. Advertised street rates are discounted to win move-ins, then lifted on existing tenants every six to twelve months through the existing-customer-rate-increase, or ECRI, model, so the achievable stabilized rate sits between the discounted move-in rate and the mature in-place rate.45 We model an achievable move-in rate near $14 per square foot ramping to a Year-3 in-place rate of about $17.20 per square foot — only roughly 23 percent above move-in, deliberately conservative against the 74 percent in-place premium Public Storage carried in the fourth quarter of 2024.4
| Demand driver | Basis | Supported figure |
|---|---|---|
| Trade-area population (3-mi ring) | ~58,000 residents, growing ~1.8%/yr | Rising storage-user base |
| Existing storage supply (3-mi) | ~315,000 NRSF across 6 facilities | ≈ 5.4 SF/capita (vs 7.8 national)2 |
| Post-delivery supply incl. subject | ~385,000 NRSF | ≈ 6.6 SF/capita, still undersupplied |
| Supportable absorption | Strong suburban submarket, ~2,500 NRSF/mo7 | ~90% stabilized by ~Year 3 |
| Achievable rate | ~$14/SF move-in ramping to ~$17.20/SF in-place4 | Below the 74% ECRI ceiling |
Supply, per-capita, absorption, and ECRI logic grounded in Yardi Matrix, SSA, and Public Storage data; see sources 1, 2, 4, 5, and 7. Figures are illustrative of the engagement type.
Six competitors, but only two with real climate product.
Six competing facilities sit within three miles, but only two offer meaningful climate-controlled space, and the rest are older drive-up boxes. Rooftops and household formation in the growth ring are outrunning modern, small-unit climate supply.
| Competitor | Operator type | Size (NRSF) | Climate | Distance | Read |
|---|---|---|---|---|---|
| Competitor A | REIT-branded | ~72,000 | Partial | 1.2 mi | Stabilized ~92%; thin small-unit availability |
| Competitor B | Regional operator | ~55,000 | None (drive-up) | 1.8 mi | Older, dated; no climate |
| Competitor C | Independent | ~40,000 | None (drive-up) | 2.1 mi | Non-climate; thin management |
| Competitor D | REIT-branded | ~68,000 | Climate + drive-up | 2.5 mi | Strong ops; far side of the corridor |
| Competitor E | Independent | ~48,000 | Partial | 2.7 mi | Aging; waiting-list reported |
| Competitor F | Regional operator | ~32,000 | None (drive-up) | 2.9 mi | Price-led; no climate |
Competitive set surveyed for the engagement; anonymized, and summing to ~315,000 NRSF. The full pipeline — under construction, planned, and permitted — was scanned, not just the standing set, consistent with lender-grade absorption practice.
Only two competitors offer meaningful climate-controlled space, and one of those is on the far side of the corridor; the nearest facility carries only partial climate and thin small-unit availability. The subject is the newest, fully climate, small-unit-weighted product in the trade area — a genuine capture gap rather than a fourth entrant splitting a saturated market. A rigorous study does not stop at today's supply: it counts the full pipeline of under-construction, planned, and permitted facilities so the absorption forecast is not quietly overstated by stores the trailing data cannot yet see.7 Here the read is a genuinely undersupplied corner for modern climate product, and absorption is modeled at roughly 2,500 net rentable square feet a month — a strong-but-defensible pace within the 1,500-to-3,500 range lender-grade work credits to strong markets — reaching about 90 percent occupancy by roughly Year 3, consistent with the Self Storage Association's 36-month average time to stabilization.71
Indiana macro: supportive demand, cost-sensitive on two lines.
The Indiana backdrop is supportive for suburban storage but decides the pro forma on two expense lines — property tax and, for a climate-controlled facility, power. Metro Indianapolis is digesting a supply wave rather than broadly oversupplied.
The demand backdrop is a tailwind. Metro Indianapolis absorbed a record multifamily wave with occupancy near 94 percent and vacancy still falling, and industrial vacancy fell to 6.9 percent — a metro absorbing supply, not one broadly oversupplied.10 That household formation and turnover is exactly the demand engine self-storage needs, and Indiana storage supply is market-driven: there is no Certificate-of-Need gate for storage, so discipline comes from reading the pipeline, not a permit.10
The offsetting reality is cost, and it concentrates in two lines. Indiana electricity costs have risen sharply — average residential bills rose 17.5 percent in the year to July 2025 and NIPSCO's rose 26.7 percent — amid a data-center recruitment wave, including AWS's $11 billion Project Rainier plus $15 billion more, Google in Fort Wayne, and Meta in Jeffersonville, that has strained the grid.11 National utility assumptions understate a climate-controlled facility's HVAC-driven power cost, so the model prices utilities off current Indiana tariffs. Property tax is the single largest operating line in storage, and new facilities are routinely reassessed higher once built and leased, so the model carries a post-development tax step-up rather than a raw-land basis.6 Decisively for capital, the 504 channel is deep here: a single SBA Indiana District Office in Indianapolis covers all 92 counties, and the Indiana Statewide Certified Development Corporation provided about 51 percent of the state's 504 dollars in fiscal 2023.12
Why the site captures the trade area.
Household growth, the supply gap, and site visibility point the same direction, and the format converts that demand into move-ins.
The three-mile trade area is a maturing suburban growth ring: new rooftops, active household formation, and a growth rate near 1.8 percent a year mean trailing Census counts understate the storage-user base, a common exurban distortion a careful study corrects for rather than extrapolates.10 Moving remains the largest single use case, so that turnover, not a fixed capture rate, is the demand the model carries.1
Format and visibility do the rest. The subject occupies visible, signalized frontage on a suburban arterial, and visible sites lease up materially faster than tucked-away ones.4 The fully climate-controlled, small-unit-weighted mix targets the stickier, higher-rate-per-foot segment, and the two nearest competitors are older drive-up boxes without meaningful climate space. That is why the model credits the subject with a capture premium and a top-of-market achievable rate for the submarket, rather than an even split of a static trade area.
The SBA 504 structure.
Total project cost lands at $6.60 million. The 504 program is purpose-built for owner-occupied real estate and fixed assets, using a bank first mortgage, a CDC/SBA debenture in second position, and borrower equity — which is where an owner-operated storage build routes.
| Cost component | Amount |
|---|---|
| Land (~4.5-acre suburban parcel) | $0.75M |
| Site work, grading & utilities | $0.90M |
| Building shell & climate/HVAC systems (70,000 NRSF) | $3.35M |
| Interior partitions, roll-up doors & unit fit-out | $0.55M |
| Security, access control, cameras & software | $0.25M |
| Soft costs, A&E, permits & contingency | $0.40M |
| Lease-up interest reserve, working capital & fees | $0.40M |
| Total project cost | $6.60M |
All-in cost ~$94/NRSF, within the ~$65–$130/SF hard-cost range for single- and multi-story climate product; a keen, value-engineered basis on low-cost Indiana land. See source 8.
| Item | Figure |
|---|---|
| Bank first mortgage (50%) | $3.30M |
| CDC/SBA 504 debenture (35%) | $2.31M |
| Borrower equity injection (15%) | $0.99M |
| Term / amortization | 25-year amortization (both tranches) |
| Illustrative rates | Bank ~9.5% · debenture ~6.5% fixed |
| Annual debt service (fully amortizing) | ≈ $533k |
Structure per SBA 504 conventions under SOP 50 10 8; owner-occupancy 60% for new construction, met by operating the facility; equity escalated to 15% for a ground-up, no-history project. See source 9.
Storage is real-estate-heavy, but the SBA treats an owner-operated facility as an eligible active business rather than disqualified passive real estate, because the operator controls leasing, management, ancillary services, and tenant entry and exit — eligibility dating to SOP 50 10 (5)(C), effective October 1, 2010 — and the 60 percent new-construction owner-occupancy test is satisfied by operating the business.9 The equity injection sits at 15 percent, not the 10 percent baseline, and that is deliberate: a ground-up build with no operating history carries a start-up profile, and SBA escalates the required injection accordingly.9 The 50/35/15 split puts a $3.30 million bank first mortgage at an illustrative 9.5 percent alongside a $2.31 million CDC/SBA debenture at roughly 6.5 percent fixed, both on 25-year amortization; combined fully amortizing debt service is about $533,000 a year — the number the projected coverage has to clear. Because the project is ground-up and runs through the Standard track above the $350,000 Small Loan threshold under SOP 50 10 8, third-party feasibility support is expected, not optional.9
Feasible and bankable, on coverage the credit can document.
The stabilized model builds effective gross income from achievable in-place rent and ancillary income, nets an expense load led by property tax and climate-driven utilities, and carries the coverage through a graded lease-up to a stabilized 1.45x.
| Line | Basis | Amount |
|---|---|---|
| Potential rental income | 70,000 NRSF × ~$17.20/SF achievable in-place4 | ≈ $1,204k |
| Vacancy, concession & credit loss | ~11% (stabilized ~90% physical, ~89% economic) | ≈ ($132k) |
| Ancillary income | Tenant insurance/protection, admin & late fees, retail4 | ≈ $118k |
| Effective gross income (EGI) | Net rental + ancillary | ≈ $1,190k |
| Operating expenses | Property tax, mgmt fee (~6%), payroll, utilities, insurance, R&M/G&A6 | ≈ ($417k) |
| Net operating income (NOI) | EGI less operating expense (35.0% ratio) | ≈ $773k |
Expenses run a ~35% ratio (within the 35–45% storage range), led by property tax (~$120k, post-development step-up) and climate-driven utilities (~$52k, priced off elevated Indiana tariffs). See sources 6 and 11.
| Year | Stage | NOI | Debt-service basis | DSCR |
|---|---|---|---|---|
| Year 1 | Lease-up (interest-only, reserve-funded) | ~$110k | Interest-only ~$464k | 0.24 |
| Year 2 | Lease-up (amortizing) | ~$613k | Full amortizing ~$533k | 1.15 |
| Year 3 | Stabilized | ~$773k | Full amortizing ~$533k | 1.45 |
DSCR computed as NOI divided by the period debt-service obligation. See source 7 for the ~1.25x storage coverage convention and lease-up testing.
The stabilized 1.45x coverage is the figure the lender documents, and it clears the roughly 1.25x storage convention with real headroom.7 The coverage is graded because storage leases up over years, not months. Year 1 sits well below 1.0 by design — it is the deep lease-up year — which is exactly why the structure carries an interest-only bridge and a funded lease-up interest reserve inside the project budget: the reserve covers the ramp-year interest, and permanent, fully amortizing coverage is measured once the facility fills. By Year 2 the project crosses about 1.15x as amortization begins and physical occupancy passes the mid-70s, reaching 1.45x at roughly 90 percent stabilized in Year 3. Underwriting to a sub-24-month fill, or to peak-2021 lease-up velocity, is one of the most common ways storage pro formas fail review; the ramp here is deliberately slow, consistent with the 36-month average, and break-even occupancy including debt service sits near 65 percent.17
On the equity side, the $0.99 million injection earns growing levered free cash flow — roughly $80,000 in the first covered year, building to about $200,000 a year once stabilized and net of a capital reserve for roof, paving, and HVAC. The exit is valued as real estate on the income approach, not a going concern: capitalizing a Year-10 stabilized NOI near $0.77 million at a conservative secondary-market storage rate — with no cap-rate compression and no speculative rent trending credited, deliberately holding the exit near project cost — implies roughly $1.6 million of net equity after selling costs and the approximately $4.55 million outstanding SBA and bank balance.6 National storage cap rates ran about 5.8 to 5.9 percent in 2024–2025, with weaker secondary assets 8 to 10 percent, so this conservative exit deliberately leaves compression on the table.6 The blended result is an illustrative levered equity IRR of about 17 percent over a 10-year hold.
Verdict: financially feasible and bankable. On independently derived demand, a graded lease-up to a stabilized 1.45x DSCR, and a ~17% levered equity IRR, the projections support the SBA 504 credit.
Independent demand, achievable rate, competition, and DSCR stress.
The engagement was scoped the way a credit committee reads it. As an independent feasibility consultant, our role is to test the sponsor's projection against the market, not to restate it — the value of the deliverable is precisely that it carries no stake in the outcome. We derived demand from population, household churn, and the trade-area supply balance, reading square feet per capita alongside observed occupancy and move-in velocity rather than in isolation. Rate was modeled net of concessions, ramping to a Year-3 in-place figure kept well below the observed ECRI ceiling, and absorption was graded to a defensible monthly pace rather than a boom-era fill.
The coverage analysis was then stress-tested across the lease-up years, not just at stabilization — the variable a storage deal is most exposed to — to confirm the credit still holds if the ramp runs slow or rate softens. One scope boundary is worth stating plainly: as the feasibility consultant, we reference, but do not perform, the Phase I environmental site assessment — watching for prior industrial or contaminated use — which is a separate environmental professional's engagement, and we do not deliver the USPAP value opinion. That combination — independent demand, achievable rate, competition, and a stressed DSCR — is what lets the lender rely on the file.
Underwriting an Indiana self-storage facility for an SBA 504 loan? Start with the feasibility study.
Feasibility Study Company prepares independent self-storage feasibility and market studies for SBA 7(a) and 504 credits, built to the coverage standard your lender must document. A methodology briefing walks through the demand, square-feet-per-capita, competition, achievable-rate, and DSCR analysis behind a case like this one, calibrated to your submarket and format.
Request a methodology briefingData sources and dates.
The deal figures are illustrative of the engagement type; the market data that grounds each dimension is real and sourced, drawn from our standing Indiana, Self-Storage, and SBA 7(a) & 504 analyses and the primary authorities they cite.
- Self Storage Association (SSA), 2025 Self-Storage Demand Study: industry of more than 50,000 facilities; average length of stay 18.5 months; average time-to-stabilization 36 months, up from 30; household penetration 8.95% (2005) to 12.60% (2024), as compiled in the firm's self-storage market analysis.
- Yardi Matrix (via Multi-Housing News), 2025–2026: national net rentable self-storage supply of 7.8 square feet per capita (December 2025), with below ~6–7 SF/capita reading as undersupply and above ~8–10 as oversupply, read alongside occupancy and velocity; national advertised (street) rate +0.3% YoY December 2025 (from −2.3% a year earlier); national stabilized occupancy 77.0% (Q4 2025); under-construction inventory ~2.6% of stock (November 2025).
- SpareFoot / Storable and StorageCafe / RentCafe (2025–2026): ~52,301 US facilities and more than 2.1 billion net rentable SF; average 10x10 climate-controlled unit ~$134/month into 2026 (non-climate ~$119); ~44% of users opt for climate control.
- Inside Self-Storage, “The ECRI Evolution” (2025): average move-in (street) rate down ~33% Q2 2022–Q4 2024; Q4 2024 Public Storage in-place rate 74% above move-in; tenant-insurance / protection income ~5–10% of revenue; the square-feet-per-capita-plus-occupancy caveat and the visible-site absorption advantage.
- Public Storage, Form 10-Q (September 30, 2025): same-store weighted-average square-foot occupancy 92.2%; ECRI cadence every six to twelve months; average annual move-in contract rent $11.60/SF (from $12.97).
- Cushman & Wakefield (H1 2025), CalcBee, and industry: self-storage cap rates ~5.8–5.9% (Class A ~5.0–5.5%, Class B ~5.5–6.5%, weaker secondary assets ~8–10%); average value peaked $174/SF (Q1 2023), declining to $159/SF (Q2 2025); operating-expense ratios ~35–45% of effective gross income; management fee ~6% of revenue; property tax the largest single line, frequently reassessed higher post-development.
- Radius+ and MMCG: lender-grade net absorption ~1,200–1,500 net rentable SF/month in average markets, up to ~1,500–3,500 in strong Class A markets; break-even occupancy ~65% including debt service; DSCR ~1.25x tested across the lease-up years, not only at stabilization.
- Loan Analytics (2026) and multiple builders: development hard-cost ranges by format (drive-up ~$45–65/SF; single-story climate ~$65–85/SF; multi-story climate ~$85–130/SF; all-in ~$65–170+/SF including land, site, and soft costs).
- U.S. Small Business Administration, SOP 50 10 8 (effective June 1, 2025) and 13 CFR 120.160(b): a feasibility study is discretionary but expected for ground-up projects with no operating history; owner-occupancy of 51% (existing) or 60% (new construction); owner-operated self-storage an eligible active business (dating to SOP 50 10 (5)(C), effective October 1, 2010); Small Loan threshold reduced to $350,000, pushing more storage deals into the Standard track that expects third-party feasibility support; the 504 structure of a bank first mortgage, a CDC/SBA debenture, and borrower equity, with the injection escalating above 10% for ground-up and start-up projects.
- U.S. Census Bureau and the firm's Indiana market analysis: Indianapolis-metro population and household growth; metro multifamily occupancy near 94% with vacancy still falling and industrial vacancy at 6.9% (Q1 2026), a metro digesting supply rather than broadly oversupplied; Indiana storage supply is market-driven, with no Certificate-of-Need gate for storage.
- Indiana utility and economic data (firm's Indiana analysis): average residential electric bills +17.5% in the year to July 2025 and NIPSCO +26.7%, amid a data-center recruitment wave (AWS's $11 billion Project Rainier plus $15 billion more, Google in Fort Wayne, Meta in Jeffersonville) straining the grid, so national utility-cost assumptions understate a climate-controlled facility's power expense.
- U.S. Small Business Administration Indiana District Office (Indianapolis, covering all 92 counties) and the Indiana Statewide Certified Development Corporation (~51% of the state's 504 dollars in fiscal 2023, with Premier Capital, the Greater Northwest Indiana CDC, and the Regional Development Company also active); USDA Business & Industry eligibility for owner-operated self-storage since the December 10, 2021 final rule (86 FR 70356, amending 7 CFR 5001.115), in rural areas of 50,000 population or fewer.