From The MSM Archives: Industry Consolidation Where: Is Self-Storage Headed?

Most mature industries, whether they are banks, automotive, or retailers, undergo consolidation where category killers take larger portions of mar- ket shares while smaller competitors are forced to merge or go out of business. Self-storage is a highly fragmented industry where the largest operators represent only a small portion of the pie. Yet, every few years there is talk that the industry is heading toward consolidation as REITs and other large operators acquire the facilities of smaller operators.

This talk is usually dismissed by experts who point out that smaller entrepreneurs are building more new facilities than large operators can acquire. Thus, they say, the industry is expanding rather than contracting.

But some influential voices in the industry are making noises about an inevitable consolidation resulting from the confluence of a recession, credit crunch, and competitive forces. “We have not had over the years a powerful, motivat- ing reason for small entrepreneurs to sell their storage facili- ties,” says Dean Jernigan, CEO of Cleveland, Ohio-based U-Store-It Trust. “We’re in a perfect situation now. We have the economy falling apart around us and that could have a dramatic effect on smaller players.”

Jernigan estimates entrepreneurs have built approximately 5,000 storage facilities in the past 10 years, but large opera- tors have not acquired nearly that many over the decade. However, the economic downturn has changed the rules.

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