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 business.
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 access.
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 place.”
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 Self-Storage Canada.