The design of self storage buildings is changing dramatically in this market growing to meet the demand for more storage by both homeowners and business owners.

This growing market presents investment opportunities in this fragmented industry, which has four large companies that only control about 12 percent of the market, according to industry sources.

If it weren’t for the identification signs, people passing by some of the latest self storage buildings might not realize what is happening inside the structures.

Newer versions are designed with exteriors which look like office buildings or retail store fronts. The attractive designs are placed in more prominent locations, instead of being located on industrially zoned land in less visible areas.

The change is dramatic, especially compared to older facilities that were characterized by long buildings with rows of garage doors.

Inside the newer storage buildings, the most important feature is that some or all of the spaces are climate-controlled to protect stored items from the variably cold and hot humid weather in this part of the country. Interior access through hallways also protects customers from inclement weather.

In addition to homeowners looking for more storage space, this type of facility has attracted doctors, lawyers and accountants looking for a place to store records, and various types of salesmen desiring a place for some of their products such as pharmaceuticals.

This type of market has also drawn local business people or investors who want to find sites in this growing market, construct the building and then either sell it to others or keep it and manage it.

One of the most sophisticated operations includes office suites (from eight to 18, depending on the site) and a conference room in addition to storage space offered in various suburban locations by Elgin-based LifeStorage. Prices vary depending on location but can be about $500 a month for an office.

Owner Christopher Barry said, “This is a turnkey operation with desks, phones and faxes in place for business people,” said owner Christopher Barry. “For all customers, including homeowners, LifeStorage provides a lobby with a fireplace. The space is designed to feel like the lobby of a hotel.”

The company, which has one- to three-story facilities with elevators in places such as Aurora, Markham, Countryside, Carpentersville and Matteson, also provides for delivery of packages, so the renters of space do not have to be present to receive deliveries.

Few, if any, other self storage facilities in the Chicago suburbs provide all of these services, according to Barry.

Climate control is an important feature in the LifeStorage buildings and includes air conditioning to prevent deterioration of stored items by humidity.

“A lot of people in the self storage business claim to have climate control, but some only have heating and not air conditioning,” Barry said. His firm also provides sprinkler systems and fire alarms.

Those types of features will also be included in Elmhurst Storage Options, which will be one of the tallest self storage buildings with four floors when it is completed in early 2008. People will be able to drive into the building and use an elevator to reach the units, which also will be climate-controlled.

The building in Elmhurst will look as if it has offices.

“My two-story building in Palatine has columns which give it the look of a fortress,” said owner Jim Lapetina. “I have a one-story building in South Chicago. I am in the process of developing two more buildings, but I can’t divulge the locations. Part of the first floor in the upcoming buildings may include a related retail store like one from a package delivery company.”

Lapetina and Barry are examples of the current type of self storage businessmen.

“Prior to the last few years, the self storage business was a mom and pop operation with people owning one or two sites. Now it is becoming an institutional market,” said Marc Boorstein of MJ Partners, a Chicago real estate firm. “But it is still a very fragmented industry since the four largest companies only control about 12 percent of the market. But some consolidation is taking place.”

One reason the market has not been dominated by one or two companies is that the self storage market is such a local market.

“It only matters what happens in a five-mile radius in the suburbs compared to a two-mile radius in the city,” Boorstein noted.

“It is easy to enter the market, which is very attractive because of a low default rate. But the devil is in the details of acquiring the best site, which is often in more high-profile retail locations where there is competition from other types of business,” he said.

That translates into higher costs, at least 20 percent higher and often 50 percent or more, he explained.

Almost all of the approximately 20 sites currently being developed in the suburbs are being constructed by what Boorstein called local or area builders. But then the self storage buildings are often sold to investors. Bigger companies usually do not want to take the time needed to search for a site, get any zoning changes and construct the building.

The self storage market has drawn the attention of one particular type of business, apartment builders and managers, according to Shawn Delaney, a senior associate with the Marcus Millichap office in Oak Brook.

“Self storage has caught the attention of the apartment guys, who do not want to deal with hassles such as plumbing and electrical problems,” he said. “So merchant builders, who are familiar with identifying sites and developing land, are constructing self storage buildings and then selling them to investors.”

Being familiar with the local market is important because some areas are overbuilt with self storage buildings and others do not have enough of this type of project, according to Delaney.

Oak Park does not have any self storage buildings because this type of project is not allowed there, but that could change, he noted. One general area in need of more self storage buildings is what he called the LaGrange Road corridor.

But, he said, there are pockets throughout the suburbs with too few storage buildings to meet the newly burgeoning demand.