By Tim Hobin, Executive Vice President – Real Estate, The William Warren Group, Inc.
As I write this, we’re finalizing the books on another stellar year in the longest economic expansion of all time, and I must admit, it has been a good run. As an industry, we have a lot to celebrate. While an overabundance of new supply is fresh on everyone’s minds, collectively, we have raised the bar for the overall caliber of our product. And while most markets are currently feeling the impact of too much too fast, I am confident we are seeing an increase in user awareness unlike anything we have seen in the past, which will ultimately lead to higher occupancies and pricing power.
With large, glimmering so-called “state-of-the-art” properties recently built along major retail corridors, the overall public can’t help but wonder at the glorious, well-designed concrete and steel behemoths that now greet them on their way to work or shopping. With the new awareness of our product type, it is only a matter of time that we finally breakthrough the longstanding penetration rate of what most in the industry would say is approximately one in 10 households at any given time. With over 128 million households in the U.S., if we were to see our user rate increase to one in nine, we would see an increase in demand of approximately 1.75 million units, but most likely much more than that as many households have more than one unit.
OK boomer. Listen up. The millennials are rapidly becoming one of our most coveted users. Not long ago, we thought we’d see a decline in usage rates of this group as they live minimally, sometimes in Mom and Dad’s basement. But, after a delay brought on by the Great Recession, they are finally moving out and making their way in this world. This demographic is well aligned to our product: They’ve grown accustomed to renting (in fact, they’re being referred to as Generation Rent), they’re mobile, and they know storage. We educated them about our space while they were in college, giving them a great experience, which will keep them coming back for more and more as they continue with their lives. But take note, since they rent a lot of their goods, they don’t need as much space as their parents. Therefore, get ready to convert those large 10-by-30s. Even with the loss of rentable area to accommodate a new hallway, breaking up a larger unit into multiple smaller units is going to be much more economically efficient.
So, I feel it’s important that we all take pride in where we have come as an industry. We no longer have to battle the public’s perception of orange doors and razor wire. Though we’re starting to see cities take note, and enact emergency moratoriums on storage development applications, overall the new supply has been a marketing windfall for all of us, as each new building proudly stands as a billboard advertising our industry to a whole new world of customers.