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7 Apr, 2022
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The Self-Storage Fixer-Upper: Ways to Add Value to an Underperforming Asset
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Written by Tom de Jong

Tom specializes in the sale, and disposition of Self Storage and other industrial assets throughout the U.S. and has completed transactions totaling in excess of $500 million worth of consideration. Tom takes a results oriented approach to each transaction or representation assignment keeping the end-result in mind from the outset. As an accomplished entrepreneur Tom has received many results-based personal and professional awards for the companies he has represented, including; Everest Club with Colliers International, Northern Nevada Industrial Broker of the Year, Rookie of the Year, Chairman’s Inner Circle and Honor Ring with Allstate Insurance Company among others. Tom was born in San Jose and has a bachelor’s of science in business administration degree from California State University, Hayward and an MBA from Pepperdine University. Tom is licensed as a broker-salesperson in real estate in both California and Nevada. Tom enjoys spending time with his family, playing golf and volleyball

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The self-storage acquisition market is as competitive as ever, with prices and capitalization rates at record levels. For the investor looking to grab their slice of the pie, a smart strategy can be to sniff out less-than-stellar assets. If you can add value to an underperforming property, it may allow you to enter a market you wouldn’t otherwise be able to afford. It can also make the difference in your decision to invest, helping you achieve an acceptable return.

Additional real estate value can come from many sources, especially in an industry like self-storage where each facility is a real estate asset but also an operational business with cash flow. Following are several strategies consider for your new acquisitions and existing properties.

Rent Increases

One of the fastest, easiest ways to have a positive impact on self-storage business revenue is to raise rental rates. Many facility operators are reluctant to raise rents, and most don’t do it regularly. As a result, their rates can be 20% to 30% below market average.

Unit-Mix Adjustments

When a self-storage facility is built, the developer and owner make assumptions about what the market wants in terms of space (hopefully based on thorough research).

Automation

More self-storage operators are looking at full or partial facility automation as a way to streamline the business and generate more revenue.

Solar Power

Adding the ability to generate solar power isn’t only the “right” thing to do, it’ll nearly always be a profitable addition to a self-storage facility.

Ancillary Sales

One of the best ways to increase self-storage facility performance is to add new revenue streams.

Curb Appeal

Finally, don’t underestimate the value of basic curb appeal and site maintenance.

As you can see, there are many ways to add value to a self-storage operation—significant value in many cases.

*Tom de Jong may be reached at (408) 282-3829 or at tom.dejong@colliers.com

Thomas de Jong, SIOR, MBA is Senior Vice President with Colliers International’s National Self-Storage Group and is active in self-storage brokerage, asset dispositions, site selection and self-storage consulting across the US with real estate licenses in NV, PA and CA.*