How to Convert Dead Retail Into Cash-Flowing Self-Storage
Why empty Kmarts are worth more than you think—and how to spot the winners
Amazon didn’t just kill retail.
It created one of the most lucrative distressed asset opportunities in commercial real estate: self-storage conversions.
Neil of Nomad Capital has converted everything from abandoned Kmarts to tornado-damaged factories into profitable storage facilities.
His track record?
Taking buildings that sat empty for 15 years—copper stripped, meth heads included—and turning them into cash-flowing assets for accredited investors.
Here’s his playbook for turning distressed commercial into cash flow machines.
3-Step Test to Spot a Self-Storage Conversion Winner
Step 1: Demand Metrics Matter More Than You Think
The magic number: 7 square feet of storage per capita.
Less than that? You’re in an undersupplied market.
More than that?….confirm the demand.
Look for:
High occupancy rates at competing facilities
Premium pricing per square foot
Population density in 1, 3, and 5-mile radius
These signal real demand, not just theoretical capacity.
Step 2: Check Competitor Performance
Don’t just count facilities, see how they’re performing.
If existing storage is full and raising rates, you’ve found gold even in supposedly “oversupplied” markets.
That’s typically because there’s something unusual about that market.
Maybe there are lots of renters, or people with stuff that needs storing but no basements or garages.
Step 3: Buy Below Replacement Cost
Neil’s golden rule: Under $35 per square foot, buy it.
If you can acquire below replacement cost, it’s almost tough not to win.
Not only do you get a great deal but it’s also your insurance against mistakes.
Case in point: Neil’s team bought a facility in a market they later realized was economically weaker than expected.
But the rock-bottom price still delivered investor returns.
Best Properties to Convert to Self-Storage
The Death of Kmart = Your Opportunity
Kmart went from more than 2,600 locations nationwide to zero.
They’re right in the heart of the retail corridor where people used to go for years to buy their home goods.
That’s why they also make sense for people to go back and store that same stuff.
The Goldmine List:
Vacant big boxes – The Amazon effect continues destroying traditional retail
Old textile mills – Abundant in the Southeast, often vacant for decades
Bottling facilities – Large open spaces, industrial zoning already in place
Grocery stores in strip centers – Especially with high ceilings for mezzanine installation
Size Matters: Minimum 70,000 Square Feet
You’ll lose 25% to hallways and doors.
A 70,000 sq ft building only yields about 45,000 sq ft of rentable space—a small facility by storage standards.
The sweet spot: 100,000-120,000 square feet with high ceilings.
Large enough to generate meaningful revenue, small enough to stabilize quickly.
The Hidden Revenue Stream: Excess Parking
Self-storage requires minimal parking compared to retail or office use. That excess parking becomes a valuable asset you can:
Parcel off and sell to multifamily developers
Lease to adjacent businesses
Sell as an outparcel to fast-food chains or banks
One deal doesn’t have to be just storage.
The best conversions become mixed-use opportunities.
The #1 Repositioning Mistake That Kills Deals
Just Because You CAN Convert It Doesn’t Mean You SHOULD
Just because you can buy a building for $15 per square foot doesn’t mean you should.
The cheapest buildings are often cheap for reasons that no amount of renovation can overcome.
Two Critical Factors You Can’t Ignore
1. Demographics Trump Everything
Storage is a recurring expense that requires disposable income. Markets with median household incomes below $45,000 struggle to support storage facilities with premium pricing.
Research beyond the basics:
Median household income (target $50k+)
Homeownership rates (homeowners store more than renters, paradoxically)
Employment stability (transient populations create churn)
Local economic trends (are jobs growing or leaving?)
A cheap building in a declining market is just a cheap building in a declining market.
2. Visibility Determines Marketing Spend
Storage customers don’t browse.
They search when they need storage, often in crisis mode (moving, divorce, downsizing).
If they can’t see your facility, they won’t remember it exists.
Hidden facilities can work, but they require higher marketing budgets to achieve the same occupancy as very visible locations.
Where Operators Leave Money on the Table
Dynamic Pricing Is Non-Negotiable
Storage is a commodity.
Nobody sees a storage ad on TV and decides they need storage.
They need storage first, then search for it.
The model that prints money: when someone rents a 10x10 unit, the next person should pay more for the same unit.
Just like airlines.
Mom-and-pop operators advertising “12-month rate locks”?
That’s great. Congratulations. but you’re leaving a lot money on the table.
The Software Does the Heavy Lifting
Third-party software tracks:
Competitor rates in real-time
Your current pricing and available units
Market-wide unit availability by size
Popular unit sizes to adjust pricing dynamically
If 10x10 units are disappearing fast market-wide, prices automatically increase.
The Math That Changes Everything
Increase NOI by just $1 per unit per month.
That’s $12 annually in cash flow.
But at a 5% cap rate, you’ve created $240 in property value per unit.
Do this across 100 units and you’ve added $24,000 in value—enough to potentially trigger a cash-out refinance.
Return investor capital tax-free, stay in the deal, and suddenly investors are getting regular checks without having any capital at risk.
So what’s the difference?
A mom-and-pop with rate locks:
Maybe 5% cash-on-cash if they bought right.
An operator aggressively managing pricing:
Potential cash-out refi returning 100% of capital while maintaining equity and cash flow.
Night and day.
The One Number That Tells You a Property Is Conversion-Ready
Under $35 per square foot = immediate consideration.
This is your margin of safety. Your insurance against mistakes. Your competitive moat.
But There’s a Catch: Timeline Kills Deals
That number gets you in the door.
What happens next determines if you make money.
Ground-up self-storage construction: 24-34 months average.
Conversions through operators with in-house construction: 12-15 months from acquisition to certificate of occupancy.
In this elevated rate environment, carrying costs will kill you.
Every month you’re paying interest on your acquisition loan without generating revenue.
At 7-8% interest rates, the math gets brutal fast.
The Red Flag Every Investor Must Look Out For
The real killer isn’t cost—it’s timeline and flexibility.
Third-party contractors need approval for every change.
That’s days or weeks of delays.
In-house teams with integrated asset management cut this to 2-3 days
One delayed permit revision can cost tens of thousands in interest.
Multiple revisions over 24+ months?
That’s hundreds of thousands—wiping out returns before you open the doors.
What Investors Should Actually Look For
Stop Obsessing Over IRR
New investors chase return metrics: IRR, equity multiple, cash-on-cash.
That’s backwards.
What you should be looking for is:
Who is the operator?
How much experience do they have?
How many times have they executed THIS EXACT business plan?“
The Checklist:
✓ Track record in self-storage conversions specifically (not just storage, not just conversions—both)
✓ In-house construction capability
✓ Dynamic pricing implementation (ask how they manage rates)
✓ Asset management experience (stabilization matters as much as acquisition)
Without these, even a “great deal” becomes an expensive education.
The Bottom Line
Distressed commercial real estate is creating asymmetric opportunities for investors who know what to look for.
The formula:
Under $35/sq ft
Below replacement cost
7 sq ft per capita (or less)
Strong competitor performance
In-house construction
Dynamic pricing
Miss any of these and you’re gambling.
Hit all of them and you’re stacking the deck in your favor.
The Kmarts are gone. The textile mills sit empty. The big boxes keep closing.
But the opportunity they left behind is just getting started.
About Nomad Capital: Specializing in self-storage conversions for accredited investors, focusing on white-coat professionals and business owners seeking passive real estate returns.
They currently manage over $75+ million in assets.
To explore current offerings, visit nomadcapital.us and click “Invest With Us” to schedule a call.
The dynamic pricing approach really shifts the calculus here. Most investors lock in static rental rates and leave serious money on the table. When you can capture that extra dollar per unit monthly through software driven adjustments, the compounding effect on NOI is substntial over a hold period.