The self-storage industry has been on the rise as the sector fared well in the face of the economic downturn as well as during the recovery. According to the IBISWorld Industry Report on Storage and Warehousing Leasing in the U.S., revenue in the self-storage industry grew at an annualized rate of 7.7% over the past five years, driven by strong demand, population growth and rising consumer spending — which are expected to continue to support the strength of the industry.
Today, industry consolidation is the name of the game. Many large, institutional self-storage operators are acquiring smaller companies at a rapid clip and this has brought the importance of competition and strong valuations to the forefront — whether self-storage operators are seeking to grow their market share or position themselves for a beneficial acquisition.
So how can self-storage owners stand out in a competitive market? As in other industries, it’s all about staying ahead of evolving consumer preferences. Consider these four amenities that can help attract tenants while also strengthening the value of a self-storage business.
1. DIALED-IN DIGITAL CONVENIENCES
Like so many other purchasing decisions, consumers are increasingly turning online when it comes to selecting a self-storage provider. Beyond maintaining a robust, appealing digital presence and strong search engine visibility, it’s also essential to have a mobile-friendly presence.
“Everything is going mobile right now. People want to find a self-storage provider from their phones and easily pull up contact information, rates and location maps,” said Thomas Gustafson, national director of the Colliers International Self Storage Group. “People want to use mobile apps to pay their monthly rental fees and access facilities. They want to be able to monitor their units from their phones and even lock and unlock units remotely.”
Some self-storage operators are experimenting with self-serve digital kiosks, which can minimize or eliminate the need for on-site personnel. However, it’s still early days for kiosks.
“Some owners have been able to lower their operating costs because kiosks reduce the need for on-site management. But many still feel strongly that tenants want to interact face-to-face with a representative,” said Gary Cooper, senior vice president | Self Storage Practice Group. “While opinions are split for now, kiosks might take off as the self-serve millennial generation becomes a larger part of the tenant base.”
2. ABOVE-AND-BEYOND SECURITY MEASURES
“Some owners are beginning to offer tenants 24/7 access to storage facilities, which has been made possible by advances in security and technology,” said Tom de Jong, senior vice president | San Jose – Silicon Valley, who specializes in the sale of self-storage and industrial assets for Colliers.
For many self-storage facilities, the majority of tenants are women. And for this customer group in particular, safety is a top priority when it comes to selecting a facility. A clean, safe, well-lit property is absolutely essential.
But some leading self-storage facilities are ramping up their focus on security even further to meet consumer demands. For example, some operators are providing facility access and electronic unit locks tied to a mobile experience.
Picture this: A tenant opens the facility gate using a mobile app, which disables the alarm for only her unit. When she walks in the front door, a lighting path is activated that leads to her unit — while other areas remain dimmer to discourage wandering from the path. She taps her access code into the app to open the electronic unit lock. As she walks back to her car, she pulls up the app again to double check that she remembered to lock the unit. Then she heads on her way.
“We’ve also seen operators discovering the benefits of electronic locks in that they can remotely control access to units, such as those rented to tenants who are delinquent in payment,” explained Matt Davis, a Colliers investment sales associate who specializes in representing sellers of self-storage facilities.
3. NICHE-FRIENDLY FEATURES
Some self-storage operators are thinking about amenities as a way to target specific types of customers, which can often provide an opportunity to pursue top rents. For example, climate-controlled units are increasingly in demand by tenants and can come at a 20%–70% rent premium.
“In line with the increased use of climate-controlled spaces, wine storage is definitely on the rise,” said Davis. “I work with one owner who even built a beautifully appointed event room for tenants who store wine and want to have a convenient space to host tasting functions.”
Some self-storage operators have also seen success in offering business centers or on-site meeting spaces, which can attract business storage tenants.
High-touch services can also be a way to target tenants with specific needs. While it remains to be seen whether traditional self-storage operators will adopt these types of services or if they will present a competitive threat, concierge storage services are beginning to emerge in some major cities. These services enable customers to schedule in-home pickup and delivery of stored items.
One of the challenges many self-storage developers and operators face is pushback from cities that see self storage as less desirable than other types of development. One of the ways storage facilities can meet a city’s demands while also attracting tenants is by making appealing, high-end design a priority.
But some cities are also requiring that new self-storage facilities in certain areas be part of mixed-use developments. While this can add complexity from a development standpoint, some owners are seeing benefits of co-locating with other types of businesses — especially if doing so attracts attention and enables access to high-demand locations.
“I recently visited a nine-story self-storage property in Miami, FL that’s perched right on the river and features a restaurant on the top floor. They hosted a wedding reception there!” said Gustafson.
While retail elements can help draw foot traffic to a self-storage property, locating within a mixed-use development with a multifamily component can also be a benefit, given the importance of the renter market as self-storage tenants.
There’s no doubt that competition will remain fierce for self-storage facilities in the years ahead, particularly as smaller, mom-and-pop owners grapple to keep up in markets where larger operators are establishing strongholds.
And while demand from investors and tenants alike has driven the industry to become much more sophisticated, it will only become more important for owners to focus on key areas such as technology, security, unique differentiators and overall design in order to succeed.