Self storage has always been driven by numbers. Namely, the bottom line an owner is able to recognize from his or her property. For many years, self storage operators have not had to consider much else outside of their own individual costs to build and operate a store and how that affects their dollar. However, over the past decade, we have seen a massive shift in attention to a new set of numbers; saturation level.
Prior to the last economic pitfall, there were very few markets in America that were deemed “saturated,” let alone, “oversaturated”. However, in the past few years, this has become the topic of conversation in the top 25 MSA’s in the U.S., especially following a peak development year in 2018. With declining rates, facilities dropping double-digits in occupancy, and new sites sitting at below break-even income levels, it is more important than ever to make the most of what the storage industry has to offer.
With that being said, here are a few ways to ensure that you as an operator (whether new or existing) can survive in today’s dynamic industry:
Join the National Self Storage Association and Your State Association
I cannot stress the importance of this enough. By getting involved with these associations, you not only learn from the best in the business, but you get to engage in open dialogue with your peers. Unlike many other sectors, self storage has always been crowned as a very transparent industry. By having conversations with fellow owners and operators in your markets, we can hopefully avoid the continued oversaturation of markets.
Order a Feasibility Study
Long gone are the days of being able to build on every single piece of dirt that’s approved for storage. Spend the $5k-$10k on a reputable firm to perform a feasibility study before your next development or expansion to ensure the success of your project. Better to make a $10,000 mistake, than a $10,000,000 mistake.
Work With a Broker
Working with a broker on the “buy-side” of a deal is just as important as hiring a broker to list your property. Brokers can help you properly assess the opportunity at hand, as well as provide valuable market data and insight when reviewing a project and the feasibility study.
Regardless of your direction in the industry, now is a good time to take inventory of your site or portfolio and make a heavily calculated decision on how you’d like to proceed. By no means am I predicting a 2008 dooms day scenario all over again. However, I’d be foolish to not point out the red flags that will directly impact your business over the up and coming years.