How To Make Wine Storage Work
It’s been said that you can make bad wine from good grapes, but you can’t make good wine with bad grapes. The same principal holds true for wine storage. In the wrong market, even the best wine storage facilities will do little more than collect dust. Conversely, poorly planned wine storage facilities won’t attract tenants, even if the market’s demand for the product is ripe for the picking.
Like the process of making fine wine, developing successful wine storage requires precision, high-quality supplies, and good timing. What’s more, similar to the wine they buy, most consumers of this niche storage product demand first-class services and amenities, upscale finishes, and top-notch security systems.
Unlike traditional self-storage, wine storage doesn’t work in just any market. Since not every market has enough demand to make it a feasible option, developers must first research the location and its demographics.
According to Al Gardes, director of project management at Lauricella Land Company, the full-service commercial real estate firm that developed Elmwood Self-Storage and Wine Cellar in New Orleans, La., the atmosphere of the city is important when considering wine storage. Of course, with week-long Mardi Gras celebrations, live jazz performances, and numerous bars, wine storage was a natural fit in The Big Easy. “It’s a party city,” says Gardes, who mentions that some of Elmwood’s tenants are seasonal residents of the French Quarter.
While it’s certainly possible to acquire out-of-town tenants, the bulk of a potential facility’s tenant base should be year-round residents and commercial tenants such as wine wholesalers and restaurants. M. Anne Ballard, president of training, marketing, and development services for Atlanta, Ga.-based Universal Storage Group, notes that the best markets for wine storage have dense high-income populations and high barriers to entry.
In addition to high barriers to entry, Deborah Fortini, owner and founder of The Vault Wine Storage in Phoenix, Ariz., advises developers to avoid markets with existing wine storage. “You can easily saturate a market,” she says, as wine storage is such a specific product with specific clients.
When searching for a market, Ballard also suggests taking a closer look at ones where personal, in-home wine cellars are not possible due to water tables or sea levels. She has helped develop successful wine storage facilities in Florida and Louisiana, including Elmwood Self Storage and Wine Cellar, Mini-Storage Messenger’s 2004 Facility of the Year overall winner, and Store Self Storage and Wine Storage, Mini-Storage Messenger’s 2009 Facility of the Year overall winner.
The Right Mix
Even if you’re certain that wine storage will succeed in your market, it’s best to start small. “Plan an expansion,” advises Gardes. “It’s expensive to build as part of a facility.” A planned expansion enables the operator to get a more accurate feel for the demand and recoup some of the building costs. If the space fills quickly, a second phase can then be more easily erected. For example, six years ago, Gardes doubled the square footage of Elmwood’s Wine Cellar. The facility now offers 730 square feet of wine storage through 70 mahogany lockers in three different sizes. The smallest lockers can hold up to 16 cases and rent for $129 per month. The mid-size locker can accommodate up to 32 cases of wine. The largest size locker, which can hold up to 64 cases of wine, rents for $289 per month.
Roy E. Carroll, founder, president, and CEO of The Carroll Companies, which has incorporated wine storage into its Bee Safe Storage facilities throughout North Carolina, also suggests starting small and planning to expand based on demand. He cautions that overbuilding will result in slower lease-up times. “Start with a smaller area, but allow for expansion,” says Carroll, who advises to include the future wine storage space in the facility’s layout. Depending on the market and its demand, he says that you may be able to triple the original square footage of the wine storage area. Though it’s market driven, a wine storage area may be 500 or 600 square feet, or all the way up to 3,000 square feet. Carroll’s lockers range from 2-by-2s up to 10-by-10s, and he notes that commercial tenants typically rent the largest lockers.
On the other hand, Fortini recommends that developers build a large enough wine storage area to justify the costs, which she says can quickly “eat up profits”.
Consistency Is Key
The main objective of wine storage is to protect the wine while enabling it to age in a properly controlled environment. Therefore, all wine storage facilities must be able to continually maintain the right environment for the aging of wine: cool, dark, and undisturbed.
Wine should be stored at 55 degrees Fahrenheit with a relative humidity ranging between 60 and 80 percent. To achieve this, the wine storage facility needs a double enveloping, redundant HVAC system that constantly monitors the temperature and relative humidity. The system, which should be made specifically for wine storage, must also have alarms to alert management of any fluxes outside of the preset temperature and humidity ranges.
Because temperature fluctuations can damage wine, it is vital that wine storage facilities have backup HVAC systems and generators in place to keep the temperature consistent, even during a power outage or system failure. For instance, without a gas generator, Hurricane Katrina would have destroyed all the wine collections stored at Elmwood Self Storage and Wine Cellar. It kept the facility’s wine storage area and the stored wine “pristine”. Gardes adds that the positive word-of-mouth advertising about Elmwood that followed the storm managed to fill its few empty units.
Sobe Self Storage in Miami Beach, Fla., Mini-Storage Messenger’s 2017 Facility of the Year specialty winner, is another facility with wine storage that managed to survive a hurricane. Its flood panel and generator kept the wine safe both during and after Hurricane Irma’s wrath.
While not all wine storage facilities’ systems need to be designed to endure hurricanes, it is essential that they always be functioning properly. Therefore, regular and exhaustive maintenance must be completed on these systems to ensure an optimal setting for the storage of wine.
Putting On The Ritz
Besides the necessary HVAC systems and backup generators, there’s one element that cannot be overlooked when developing wine storage: the glitz. “It has to look like a million bucks,” stresses Ballard. “Renters want a high-end look, so use high-end materials and extra finishes. Otherwise, it won’t work.”
Some of the upscale finishes and features that make wine storage facilities stand out were incorporated into the various winning Facility of the Year properties. For example, the exterior wall of Elmwood’s Wine Cellar has a custom mural that was hand painted by a Chicago-based muralist and its entrance is secured by a handcrafted bronze door that’s decorated with brass grapevines. Stained glass skylights, crown modeling, mahogany lockers, and etched glass panels, as well as custom, hand-painted, hand-fired ceramic floor tiles give the wine cellar’s interior an all-over first-class feel.
“You have to catch their eye first,” says Gardes. “If you’re going to do it, go all in!”
Similar features can be found at Store Self Storage and Wine Storage in Palm Beach Gardens, Fla., but its main attraction is its versatile wine tasting room that includes a kitchenette with mahogany cabinetry, flat-screen TV, and conference table that can seat 22 people. “Give yourself space to be successful,” says Ballard, who adds that tasting rooms should be at least 15 feet by 25 feet in size.
In addition, Store Self Storage has three other noteworthy features within its wine storage vault that protect the integrity of the stored wine: motion sensor low-heat lights to keep it dark, smooth tile floors to control vibrations, and perforated locker interiors for an even airflow.
Superior Security And Service
Due to the value of their collections and their passion for wine, these customers tend to expect state-of-the-art security systems and first-rate services. Of course, cameras and alarms are both must-have security features for wine storage. However, unlike traditional self-storage facilities, many wine storage facilities utilize biometric security systems as an additional layer of protection. Some also provide their wine storage customers with 24/7 entry through private exterior doors that utilize access codes and fingerprint scanners.
Sobe Self Storage’s wine storage area has a triple secure system with a biometric keypad that provides thumbprint access and a “man trap”. After entering the first door, customers must enter a second door of unbreakable security glass before reaching their wine storage lockers.
One of the services most valued by wine storage customers is likely package acceptance, especially when they belong to a wine of the month club and are not home to accept deliveries. These customers appreciate the convenience of having their shipments delivered directly to their wine storage lockers.
Another valuable service is to provide printed reports about the stored wine. These reports contain details about the temperatures, humidity percentages, and conditions in which the wine was stored. Wine storage customers can use these reports to fetch top dollar when selling their wine.
Inventory services may be beneficial to customers as well. While some may opt to enter and maintain their own inventory, others will gladly pay a fee for staff to do this time-consuming task. Fortini states that wine inventory apps are available that track valuations and aging notes for each bottle entered into the system. Likewise, an inventory is beneficial to renters who have elected to purchase insurance for their wine collections. For additional fees, staff could maintain its wine storage customers’ inventory by entering the data of new shipments as well as updating data about any bottles sold and/or consumed.
Moreover, because The Vault Wine Storage is strictly a wine storage facility, Fortini offers additional services such as assisting her clients with selling their wine. Her facility also provides racking options for customers who wish to rack their bottles instead of storing them in cases or boxes.
Last but not least, tasting rooms are another amenity. Similar to conference rooms at traditional self-storage facilities, wine tasting rooms are designed as a place where wine storage customers can host their own tastings, pairings, club meetings, or other social gatherings. And Store Self Storage and Wine Storage even has a sommelier, or wine steward, on staff to offer professional wine advice to its customers.
Marketing And Networking
When it comes to marketing wine storage, there are numerous methods that have proven to be successful. For starters, if wine storage is a new concept within a market, it may be necessary to educate the potential clientele about the product. Fortini says that in the Phoenix area, people didn’t immediately understand its benefits. So, she altered her original direct marketing to answer the question “Why store it at The Vault?” to help wine collectors and wholesalers realize that the facility provided a secure, climate-controlled atmosphere for storing their valuable wines. Nowadays, word-of-mouth marketing is her facility’s most advantageous form of advertising.
Ballard has obtained both residential and commercial renters by visiting local wine retailers and wholesalers, where she distributes bags of promotional items that feature the facility’s name, logo, and contact information. Business cards and brochures are supplied as well in case the sellers know of clients who are seeking storage. In addition to wine distributors, Carroll reaches out to vineyards, restaurants, and known collectors. He notes that vineyards are a good source for referrals as they sometimes have clients without space to purchase extra cases of wine.
Both Carroll and Ken Edelman, president of Edelman Development Corporation, the company that developed Sobe Self Storage, utilize some online marketing tools, such as Google ad words and internet advertisements, to attract renters. Edelman also mentions that CubeSmart will take over the management of Sobe Self Storage in March, and the company has its own wine storage strategy that will assist with marketing.
Nevertheless, Gardes says that the winning strategy for wine storage is to “network like crazy”. “It’s all about networking and having a presence in the city,” he adds. “You can’t make enough contacts in wine!”
He and his employees are heavily involved with 10 business organizations. And Gardes is on the board of directors for three of those organizations. He hosts eight different annual events at Elmwood Self Storage and Wine Cellar as well. One of the facility’s most popular annual affairs is its “Around the World with Wine” event, during which guests are issued blank “passports” that they get “stamped” at six different “countries” within six different units. Each unit is decorated to represent a specific country; it’s then supplied with music, food, wine, and costumes from that country. The has been used as a charity fundraising event at Elmwood too, raising $8,000 for a children’s hospital.
“You need to be recognized in the community,” says Gardes, who suggests that wine storage operators cultivate relationships with other wine connoisseurs by joining (and actively participating in) various wine clubs and/or groups. For example, he’s a member of Krewe of Cork, a wine club that participates in the annual Mardi Gras festivities as well as the New Orleans Wine and Food Experience Street Stroll.
What’s more, having an on-site tasting room will enable your wine storage facility to host its own wine tastings, wine networking events, upscale charity fundraisers, or any other promotional happenings you wish to organize.
A Bunch Or A Hunch?
While adding wine storage to an existing self-storage facility can surely produce some prestige and new revenue, it is of utmost importance to ensure that there is ample demand—and little to no existing supply—in your market before you make an investment in developing it. Just like one basket of grapes doesn’t make a vintage, one handful of potential clients doesn’t indicate substantial demand for wine storage.
To Sell Or Not To Sell
At traditional self-storage facilities, selling retail items is both a convenience to customers and a substantial revenue stream for the business. However, there is no consensus as to whether wine storage facilities need to sell wine-related retail products as many wine storage tenants are knowledgeable collectors who typically have all they need to store their expensive wine collections.
Although self-storage tenants are encouraged to obtain tenant insurance to protect their stored goods, wine storage operators should consider suggesting specialty insurance coverage to their wine storage customers. Since they care enough about their valuable wine collections to store them at a facility with constant temperature and humidity controls, they will likely be interested in specialty insurance designed specifically to protect the full collectible value of their wine.
The AXA ART Collectibles Insurance from MiniCo Insurance Agency, LLC, offers coverage up to $1 million (higher limits are available) with $0 deductible and competitive premiums. It also provides more complete coverage when compared to traditional homeowner policies. Plus, in the unfortunate event that tragedy strikes your wine storage facility, your tenants can seek compensation for their wine collections from their individual collectibles insurance policies.
Wine storage tenants can visit www.minico.com/collectibles-insurance/wine for details.
Erica Shatzer is the editor of Mini-Storage Messenger, Self-Storage Now!, and Self-Storage Canada.