A trend that we have seen over the last several years is a migration of independent owners/operators hiring professional management companies to run their facilities. The majority of the REITs, as well as the larger operators throughout the country have focused on third-party management as part of their platform. These companies have provided the industry with legitimacy, which has manifested itself through higher rental rates, disciplined pricing, product awareness, increased financing availability, and higher property valuations. This movement has elevated the entire industry, leaving smaller operators to feel left behind. This can be a problem for them as the size of their facility doesn’t generate enough revenue to hire full-time management, and owners are not up to speed with constant changes in the industry.
Over the years, I have seen that a facility has the most success when the roles of management are clearly defined. The facilities that struggle the most are the ones where the owner tries to do everything themself. They think they are saving money but in reality, they become satisfied with generating a certain level of revenue and don’t find a need to increase rents, market effectively, or even upgrade their facility. They become such good friends with their tenants that they feel guilty raising rents, even if they are 20 percent below market. There have been so many times when we have appraised facilities where there hasn’t been rent increases in years.
Our firm has appraised thousands of facilities over the last five years. It is easy for us to recognize facilities that are well-operated, or those that could use some help. Here are seven way that will help you effectively and efficiently manage your self storage facility.
A survey that was completed where thousands of women asked the question, “What was the most important characteristic for you when deciding which facility to rent from?” The number one answer was security, but the second was professionalism.
How are your managers treating your tenants? Does their appearance represent professionalism? Is your facility well-maintained and are the units swept out? All of these questions play an important role in whether or not people will choose your facility.
2. Keeping Up With Technology
One of the main reasons why owner/operators are falling behind is technology. The customer experience no longer starts when people walk into your facility, rather it starts online. Approximately 75% of all customers will find you online (higher percentage in primary markets, lower percentages in tertiary markets). All facilities should have an effective interactive website. Prospective tenants interact with your website just as much as they interact with managers at your facility. They won’t rent from a facility with a bad manager, and they typically won’t rent from a facility with a bad website, or no website for that matter. Taking your business online and setting up rent reminders and monthly auto-pay makes it easier for your customers to pay rent on time, in addition to making your life easier.
Let’s start off by talking about concessions, are they hurting or helping you? Concessions are a powerful tool to attract tenants. However, be careful not to advertise blanket specials. Instead, concessions should be strategically targeted to increase income by discounting specific unit types that have historically low occupancy levels. This will not only increase the productivity of those unit types with higher occupancy but will also sustain the economic productivity of unit types heavily demanded by the market. Go take down all those $1 move-in specials or second month free signs!
Between 2015 and 2017, the realized average rental rates increased from 5% to 10%. In some markets we saw increases significantly higher than this. This is why self storage is the top performing sector in the real estate industry. This range has declined between 2% and 4% in 2018 and will continue in 2019. It is important for managers to track other facilities to determine how comparison their rates are to the market.
4. Have a Plan/Budget
Good operators are able to budget an amount for future deferred maintenance, including streets, roofs, leasing office (first impression), landscaping, doors, signage, HVAC, etc. The best tenants will be looking for high-quality, attractive facilities. Simple practices such as a fresh coat of paint, pressure washing doors and exteriors, picking up trash, and sweeping out units are all affordable ways that please those paying attention to detail. A few flowers and nice landscaping will also add greatly to your facility’s curb appeal. However, you can’t ignore the big stuff, as it tends to creep up all at once.
5. Track Your Performance
Do you know exactly what your facility’s weakness is? Do you know how potential customers are being received by your staff? Are you reviewing the statistics for your facility daily/weekly? By keeping detailed records you can address individual supply and demand issues. By keeping track of your customer service and tenant flow you can notice trends that may help you capture more business. In both instances, tracking your performance can help you chart your path to increased value. There are great data sources available to us in the industry now that help us do all this.
6. Understand Your Market
You have to know and understand your own demographic. Who are your tenants? How long do they stay? What unit sizes, are in high demand? Is the majority of your clientele residential users or is there an opportunity with office and industrial rates increasing, to have more commercial users? These are questions you should be asking yourself when targeting your market place and not take the approach that one size fits all.
7. Prepare for the Worst
Over the last couple years in Northern California, we have experienced earthquakes, fires and floods that were devastating for some facilities. If the Oroville Dam would have broken, it would have wiped out several facilities. We saw the same thing happen in past years in Louisiana and Houston. Do you have the proper insurances in place? Are you providing or requiring your tenants to carry their own insurance? Unfortunately, these are things that an owner needs to plan for.