Thanks to high occupancy rates, increasing residential development, and the improvement in the economy, the increase in new storage supply of 2016 will likely continue in 2017. While opportunities still exist for self-storage development across the country, and there’s plenty of capital available for feasible storage projects, the need for due diligence has never been greater.
According to Jeff Helgeson,
principal at Gilbert, Ariz.-based 180 Self-Storage, LLC, a self-storage
property management and consulting company, developers, especially those
without previous storage experience, should practice more restraint when it
comes to building new storage facilities within booming MSAs. “There are a lot
of developers who want to get into the storage industry,” he says, “but they
aren’t doing enough due diligence.”
Helgeson adds that, from his
company’s perspective, developers who are new to the self-storage sector seem
to be throwing caution to the wind when it comes to site selection, which could
spell trouble for their development and others in their trade area.
“We have a backlog of requests
for market feasibility studies and storage consulting services,” says Helgeson,
“but they aren’t considering the competition. People are getting too far into
their projects before realizing other facilities are being entitled or built
nearby. They need to be aware of the trade area. That’s where they are making
the most mistakes.”
Site Selection Standards Although some industry professionals are adamant that certain MSAs are
saturated and should be avoided, Helgeson is adamant that opportunities can
exist anywhere. In fact, when asked if there were any markets that he would
suggest skirting, he states that good possibilities can be found everywhere,
even in cities with hefty supply ratios.
While other industry veterans have
placed some top MSAs on their development blacklist, Helgeson takes a more
site-specific approach, saying that there could be pockets of opportunity
within those cities that have been overlooked. Essentially, he doesn’t roll out
any potential site for self-storage development without first bearing in mind
all the demographics and attributes of the location.
Total population and current
storage supply are just the tip of the iceberg. Developers must dig deeper for
the best results, considering how the demographics of the area’s population
could influence the occupancy rate at the proposed facility. For instance, when
taking only age into consideration, those who lived through the Great
Depression are more likely to use self-storage than young adults who have grown
up in a more disposable world.
Helgeson also reminds storage
developers to take a close look at the trade area’s competition. Do they have
strong occupancy rates? What storage product(s) do they offer? Is there new
supply in the pipeline? Moreover, perform the due diligence to be sure that
existing facilities in the area are not expanding their properties. Any
additional storage supply can—and will—have an impact on your new storage
As for the physical qualities of
the site, Helgeson reminds developers to follow the standard self-storage
specifications. “Location is key,” he says. “Over 50 percent of the customers
we survey come from drive-by traffic. They may visit a website afterward, but
they’ve typically seen the property first.”
For starters, long gone are the
days when an industrial parcel will suffice for a self-storage facility.
Nowadays, the most successful storage properties are located within retail
areas. The sites should have high visibility, solid traffic counts, and easy vehicular
Helgeson adds that, despite
requests for storage facilities to have the appearance of an office/retail
building, customers should still be able to identify the building as
self-storage. He admits that pleasing the neighborhoods and municipalities may
require some creativity during construction, but it’s necessary to have the
iconic roll-up doors visible in some way. “People must recognize that it’s
storage,” says Helgeson.
Don’t Wait, Differentiate! Speaking of creativity, Helgeson believes that self-storage operators need to be more original when it comes to marketing their facilities, especially with new competition afoot. “Try to create a niche within your trade area,” he says, adding that some of the most fruitful marketing endeavors he has seen have been “grassroots” efforts that are unique to the facility’s location.
Of course, it’s always beneficial
to attract customers through community outreach. A few of the industry’s go-to
options include serving as drop-off locations for various donation drives,
providing free storage space to various charities and organizations, and
hosting community yard sales or charity auctions. While all of those are
certainly great choices, the possibilities are endless. Therefore, take the
time to find a worthy cause that matters to your employees, tenants, and
community, and make it your mission to sow seeds of success through kindness.
“Do the little things that can
help get your store exposure,” he says. “There are plenty of low-cost ways to
differentiate your store from the competition.”
Helgeson also reminds storage
operators to take advantage of free marketing opportunities though social media
sites and other online platforms such as craigslist. In addition, he can’t
stress enough the importance of having a website. For Helgeson, it’s especially
perplexing when Google Maps has verified storage locations for facilities with
no web presence.
Indeed, these days even the
smallest of operators should be allocating funds for a basic website. While it
doesn’t have to be the most sophisticated website on the Internet, Helgeson
advises operators to—at the very least—have their various unit rates posted
online for customers to review. “Don’t have a site that says ‘call for rates’,”
he says. “If they wanted to call, they would have called in the first
Management Matters Even though all the previously mentioned items will undoubtedly get customers to walk through your facility’s front doors, it’s your managers who convert them into tenants, or not. As a matter of fact, there are plenty of tenants who choose a facility solely on a manager’s personality. “People want to do business with someone they like,” says Helgeson, adding that tenants also need to feel that they are leaving their belongings in the care of someone they can trust.
While it’s in your best interest
to entrust your asset to someone who is going to take care of the property and
keep it clean, the job of self-storage manager is so much more than a caretaker
position. And unfortunately, Helgeson, whose company performs mystery shops at
existing self-storage facilities, states that many properties are either
under-managed or lacking a quality manager.
“Over half of the mystery shops
are a disappointment,” he says. “The person behind the counter is a huge way to
differentiate yourself from the competition. You need a high-energy person who
genuinely likes people.”
Erica Shatzer is the editor of Mini-Storage Messenger, Self-Storage Now!, and