“Where are we in the economic lifecycle of self storage?”
I get asked this a lot.
Every business, every industry, every country (you get the picture) has a lifecycle. I have found it helpful to relate the cycles of a business or industry to a human life. In other words, we have the following:
Let’s take a look at some different industries.
The US Auto industry. What part of its lifecycle is it in? In 2008 it was being institutionalized, wasn’t it? Apparently, that worked and it went back through it’s Prime. It could still be there, or perhaps more likely, Middle or Old Age.
Think about the video industry (remember when you used to rent videos?). Boy, that was a fast one. In less than ten years it hit Prime with Blockbuster, Red Giraffe, and Hollywood Video, then quickly got old and for the most part is dead.
Some industries have life cycles that last hundreds of years – think about Coke. Others, like the video rental industry, are very short.
Where do you think the self storage industry is? My best guess is that we are now in Young Adult.
Let’s look at the early years: very small, fledgling Mom and Pop facilities where the manager lived onsite. Then the industry started growing up with the advent of Public Storage. “Institutional” grade product because defined in the 1970’s. More product started coming online in the 1980’s and we were then in our Child age. I think we went through the Teenager years around 2006 through 2015 or so.
Think about a teenager. They are bold and indestructible, or at least they think they are. Build, build, build. Then we realized, “Wait, we can’t build forever. We now have the tools to analyze as an industry to see of we are becoming overbuilt.”
You hear even small investors saying this. I would say we are growing up as an industry and in our Young Adult phase headed to our Prime.
Not a bad place to be for an industry.
How long does an industry stay in Prime?
Who knows. Some for a very long time.
Industries can roll along, then something comes along to disrupt the industry. For example, digital for Kodak. The company or industry can’t adjust fast enough to the environmental change, and BAM, they’re gone.
Also keep in mind that not only does every industry have a life span, every company in that industry has a lifespan as well.
There is also the economic backdrop at any given moment in which the industry is breathing its air.
I have found the economic lifecycle easier to relate to like the seasons of the year:
Where is the US economy now?
My guess is the Fall. In Winter, things slow down, become hard. Borrowing becomes hard, prices fall.
2016, for the most part, was Summer. Prices were high, everyone’s feeling good, lots of construction, etc.
One thing to keep in mind, at least as far as real estate goes, is that more wealth is created in winter than any other time. Self storage is a real estate play.
My coaching is: get ready for Winter. More on that in other episodes coming up.
So where do you think you are? Where do you think we are as an industry? Where do you think the economy is?
These are the questions you continually ask. Then look to the market for an answer and you will be able to anticipate what is coming around the next corner. Where is the industry? Where are you in the industry? Where is the economy?
It is a leader’s job to accurately predict what is coming and prepare for it.
More next week on how to prepare for Winter if you agree that’s what is coming next.
I’m very curious about where YOU think we are in the life cycle, and about where you and your company are in that life cycle. Share below and as always, let us know what your challenges and successes are.
