John Stewart, a member of the real estate department, construction services group and real estate special opportunities group with the law firm Cole Schotz P.C John Stewart, a member of the real estate department, construction services group and real estate special opportunities group with the law firm Cole Schotz P.C.

NEW YORK CITY—The growing self-storage industry in New York City could be shackled by a proposed zoning amendment that would require new projects to secure special permits in designated industrial zones in the city.

The New York City Planning Commission is scheduled to begin discussions today on the zoning amendment aimed at supporting Mayor Bill de Blasio’s industrial action plan geared at promoting projects in industrial zones that produce more jobs. While existing self-storage facilities would not be impacted by the proposed zone change, the measure, which began the public review process on May 22, would require new self-storage projects to apply for a special permit and be evaluated on a case-by case basis in certain industrial zones in the Bronx, Brooklyn, Queens and Staten Island.

The zoning amendment went before affected community boards in the five boroughs as well as before borough presidents and is now back before the City Planning Commission. The commission, along with the City Council, must approve the measure before it goes into effect in the select industrial zones in the Bronx, Brooklyn, Queens and Staten Island.

John Stewart, a member of the real estate department, construction services group and real estate special opportunities group with the law firm Cole Schotz P.C. estimates that the City Planning Commission will likely take about 60 days to review the zoning amendment and issue a final proposal before it goes to the City Council.

Stewart, who works out of the law firm’s New York City and New Jersey offices, says the main concern is that there is a need for self-storage facilities in the boroughs, not only for city residents, but for small businesses as well. “There are a lot of residents and small businesses that use mini or self-storage to offset the retail cost, which are high in the area for purposes of operating their businesses,” he says. “The special use permit will stifle development of self storage in the designated areas because it adds the bureaucratic mechanism of a special permit, which is a long and expensive review process that adds uncertainty as far as development.”

He notes that some manufacturing zones in the boroughs remain as-of-right districts where self-storage facilities can be developed. However, in the areas targeted in the zoning amendment and based on the goals of the bill and the city agencies involved, Stewart believes it would be very difficult to secure a special use permit for a self-storage project in those areas.

Stewart contends that the measure will decrease competition and eventually lead to higher self-storage costs for New York City residential and commercial customers in the future.

He says that both New York State and national self-storage trade groups have come out against the proposed self-storage zoning amendment.

Jon Dario, a member of the board of directors of the New York State Self Storage Association, says the association is against the zoning amendment proposal because it feels it is “unprecedented in terms of singling out a particular industry in order to achieve some public policy. The city is already under-supplied in terms of self-storage use,” he says.

The Self Storage Valuation Group at CBRE Valuation & Advisory Services in an August 2016 report stated that New York City is the number one under-supplied self-storage market in the country, followed by San Jose, CA, Los Angeles, San Diego and Baltimore.

Dario charges that the proposal would take away about half of the areas that self-storage facilities can currently build as-of-right. He  adds the restrictions would hurt many small businesses that utilize self-storage facilities in order to avoid much higher costs at retail or industrial properties in the city.

“There are really not good options for these small business operators,” he says. Dario, who is president of Manhattan Mini Storage, estimates there are approximately 220 self-storage facilities in New York City at the moment.

The association has heard feedback from investors that due to the new restrictions, they will likely pursue self-storage projects in other markets, Dario says.

The self-storage sector faces an uphill battle against the push for zoning restrictions in the city’s Industrial Business Zones. The Planning Commission stated in its announcement on May 22 that “the unregulated development of self-storage in IBZs detracts from the city’s vision and goals for these active industrial areas. Self-storage facilities are seen as a low job-generating use that primarily serves household rather than business needs. They are typically developed on large sites near Designated Truck Routes—sites, which are in limited supply and could potentially provide future siting opportunities for industrial, more job-intensive businesses.”

The commission later stated that it is “crucial to secure the future availability of sites in IBZs for businesses in industries such as distribution, construction, wholesale, logistics, transportation, film production, manufacturing and utilities.”