- Self-storage is a business that claims to offer less of a white-knuckle ride for investors and managers.
- It wins out over other real estate sectors in terms of simplicity, reliability and resilience, it can be easy to start out in, and the path is well-trodden.
- Being the CEO of a self-storage company could incur comparatively little stress, and now is a very good time to start.
The self-storage industry comes to rescue when people face life events — famously death, divorce and dislocation — but is also invaluable for anyone with limited living space. And being considered an essential service, COVID-19 didn’t shut its facilities down. It therefore sees a consistent cashflow and tends to ride out challenging times better than comparable sectors. Also, it is often called a “three-mile business,” so a loyal local customer base can be built up. Any CEO moving into the self-storage industry has the opportunity to not only create a reliable profit-maker but also to mold a recognizable and appreciated brand.
Starting Out in Self-Storage: Everything a CEO Should Know
A self-storage business can be established from either a small or a large financial base. Although bigger companies now have a greater share of the self-storage sector, mom and pop operations still proliferate and can be bought up — when the cap rate appeals — and then built up. With priority given to refurbishment and rebranding, and allowing for perhaps a couple of years before profitability, this could be a comparatively smooth path for a CEO entering the industry.
The rapid growth of the self-storage sector in recent years has created a great diversity in terms of both location and facility type. Of the US’s more than 1.5 billion square feet of rentable self-storage space, 13% was built over the last 5 years, as reported by Storagecafe, an online self storage marketplace. More people therefore have a handy self-storage facility on their doorstep, and there is also a wider range of options for any new investors to the sector.
The traditional out-of-town rows of lock-up garages have been joined by smart new inner-city facilities and converted retail spaces. The latter has become particularly popular of late, as repurposing vacant premises greatly reduces construction overheads. In addition, a strip mall lot that has been vacant for a while, for example, can often be bought at close to land value, and city hall may look favorably on turning an eyesore into a useful community asset.
Why the CEO of a Self-Storage Business Has It Easier
Self-storage avoids several downsides often experienced in other real estate sectors. Unlike residential housing, clients are rarely on site and their problems are generally not so challenging. Managers have a reputation for showing understanding to delinquent renters and abiding by the rules when having to clear out units and auction the contents. While it’s true that some antics of rogue clients have been turned into horror films, these instances are very rare!
Staffing a storage facility is fairly straightforward. An on-site manager may need to be a jack of all trades, with customer service skills plus perhaps some ability in marketing and competence with a spanner. Experienced facility managers require less training, but the industry finds that suitable applicants come from a variety of backgrounds. Security personnel may be a welcome sight, but many facilities use surveillance cameras and sensors effectively.
With the sector’s high appreciation of technology, it is not surprising that storage providers could quickly implement contactless operations last year, and unmanned facilities are increasingly common. As long as an operator keeps up with the latest security and customer service options and stays aware of its customer base, a business plan can be made with comparative confidence — just remember to factor in possible changes in the level of local competition.
Why Your Self-Storage CEO Journey Should Start Now
That self-storage rides out challenging times was seen in the recession beginning in 2007 and is also proving to be the case following COVID-19. Many people had to downsize, boosting the need for storage, both temporarily to house possessions before the new home was ready and beyond if there was no longer space for them all. Businesses which couldn’t work from physical premises often rented storage lockers to hold their stock, switching to mail order or even operating out of those units. The sector attracted new clients during this time, potentially widening its customer base.
And the pandemic has created a lot of unused commercial space across the nation, so the timing looks good for self-storage repurposing projects. The spectrum of self-storage provision across the US runs from large Texas cities offering up to 10 square feet per person down to New York City with barely more than 3.5 square feet. Some areas have enjoyed more lenient building restrictions, but other places are now catching up. Regardless of location, however, the local nature of the business means opportunities can always be found.
Perhaps the most unpredictable variable a self-storage CEO will have to deal with is local competition, but this is where the sector’s flexibility kicks in. Early in the pandemic, operators were able to lower street rates to maintain occupancy and financial buoyancy — rent growth is now more than back to normal. And people are increasingly realizing the value of self-storage, decluttering their homes and storing occasionally needed items, especially as apartment and backyard sizes are getting decidedly smaller. Now may be the time to make that investment and lead a self-storage business.
The self-storage industry tends to be reliable, flexible and well-understood, and it is sometimes boldly said to be recession-proof. The stresses of being a CEO could be better predicted and avoided in such a sector. You could even consider adding the running of a self-storage operation to your other CEO responsibilities — double duty seems to work just fine for Jack Dorsey. The sector looks to have a good future with its customer base diversifying and many people now realizing how effectively a nearby storage unit can be used, and at a much lower cost per square foot than residential space. Vacant commercial property is being sought out by self-storage investors, so the time seems to be right.
Written by Francis Chantree.Track Latest News Live on CEOWORLD magazine and get news updates from the United States and around the world. The views expressed are those of the author and are not necessarily those of the CEOWORLD magazine.
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