Self Storage Investing Newsletter

Why are self-storage roll-up doors orange? Why not purple or red? Some would argue that the color was chosen because of marketing and attention-grabbing. But the truth is that it was just randomly chosen by the owners of Public Storage out of the spectrum of color choices. That’s what makes this industry exciting – it’s so young that many of the industry norms can begin with you. The self-storage industry has only been around for about 50 years at this point, and there is still a hugely fragmented market and a ton of opportunity for those who want to put in the effort. Maybe you can be one of the pioneers who will put their mark in this exciting sector of real estate.

2013 was a year with a lot of new stories, from the roll out of Obamacare to the Edward Snowden spying scandal. One story, however, that didn’t get much attention was the increase in occupancy in self-storage facilities, which jumped from 83.6% in 2012 to 87.4% in 2013. It is possible that occupancy rates in U.S. self-storage will hit 90% this year. So why is occupancy so high, despite the “Great Recession”?

Instability in the U.S. economy

The “Great Recession” has proven that self-storage performs extremely well in times of economic crisis. Instability in housing and employment leads consumers to store their goods until times settle down. For example, when somebody moves or feels insecure about how long they’ll stay at an address, they are prone to gain peace of mind by simply renting a self-storage unit to make sure that their possessions are one thing they don’t have to worry about.

Demographic trends

The impact of the Baby Boomers (those born between 1951 and 1964) is having a huge impact on self-storage. This group, which is the largest segment of the U.S. population, is retiring at the rate of 10,000 people per day, and many of these retirees are downsizing and needing to store their possessions which will not fit in their new, smaller dwellings. This phenomenon will continue for at least 15 more years.

Reduction in new self-storage facilities being built

The number of new self-storage facilities in the U.S. being built has plummeted since 2007. The reason is that construction financing has been harder to obtain, as well as available sites that are prime for self-storage are simply running dry. Good self-storage sites have frontage and are in major urban markets – and a large number of these locations have already been built out. This keeps the supply/demand relationship in check.

Improvements in marketing

Self-storage owners have become perpetually better at learning the most efficient and effective ways to market their facilities. The internet has allowed for pinpoint marketing to those who are ready to rent a unit. The modern marketing of self-storage is proactive and aggressive – not like the days of running a simple yellow page ad and waiting for the phone to ring. This has driven up the demand for units and the ease in which consumers can store their goods.

Conclusion

Self-storage is on track to attain record levels of occupancy in the near future. High occupancy leads to higher yields and performance by existing properties, as well as the appetite for new loans by the investment community. Self-storage is in a very good position for 2014 to be a record setter.

Self-storage is not an overly complicated business. Most self-storage facility owners are looking for ways to attract consumers to their facility over the competitors’. But just how do you keep track of what advertising is working and what isn’t? First off create a list of what marketing avenues you are using. Maybe it is only a Google ad words, in conjunction with your signage. In a large metro area you may need to expand your advertising to cover TV and Radio, as well as smaller ads in local papers. Make sure you have great signage if you are located on a busy road. When you are spending money on different advertisements, you want to know if you’re spending the money wisely. On your rental paperwork add a box where a customer can check specifically where they saw your company. Keep track of what ads are bringing in the most customers and cancel the ones that have no draw. In this way, your marketing program will eventually be highly tuned and your customers will determine which ads you run.

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