So as I look into the future as part of what I regularly do as a business owner, I am realizing the self-storage business of before will most likely not be the industry of the future.
If you relate to the industry in terms of a human life cycle, when I first entered the storage business in 1995, the industry was, let’s say, a toddler. It wasn’t in its infancy but definitely wasn’t a mature industry.
Today, it is an adult approaching middle age. It has become very sophisticated and is evolving rapidly.
As I look ahead, many of the industry’s defining characteristics are changing right before our eyes. Let me share a few trends I see shaping the future of self-storage. Some may seem futuristic, others may appear routine, but all of them will affect us smaller self-storage owner/operators.
Income Growth
In the past, we could always rely on some income growth.
Even during the Great Recession of 2008 through 2010 or so, we grew about 3% per year in average income growth.
That is not the case anymore or into the future. You can underwrite that way, but the reality is some years it is now negative. You can thank the REITs for that.
As much as I hate the game of dynamic pricing, and even if you choose not to play that game, in most markets, dynamic pricing will impact what you can charge for rental rates.
You had better underwrite accordingly, or you may be one of the many “for sale” facilities at 35% occupancy, or your new building is at 35% occupancy, and your interest-only time has run out.
I am even having to modify the Storage World Analyzer to adjust for this future in the industry as I see it.
You have got to know, in your trade area, what the current pricing required is and what the next 12 to 24 months will most likely be based on supply coming online, and underwrite to that reality.
The days of 3% to 5% income growth per year are over in many trade areas for the foreseeable future and beyond.
Data-Driven Decisions
Your success in the storage business will be a function of the decisions you make.
Given that this is a hyperlocal product, it is critical you know all the different trade areas you are contemplating and end up doing business in.
You have got to have access to fairly accurate data these days.
Given how critical marketing is today, especially online marketing, you have got to know which channels are producing results and which are not. These can vary from facility to facility, even in the same city or market.
We have got to have multiple subscriptions or have operating systems today that peer into the data needed for owners to channel their resources in a way that impacts the bottom line.
New operating systems like Cubby or Monument will quickly make legacy operating systems become a thing of the past.
Owner-Designed Operating Systems
Speaking of operating systems, it will not be too long before even the current high-tech and very functional operating systems also become relegated to the pile of vintage things of the past for our industry.
AI is evolving so fast that within the next five years or so, it will be common for owner/operators to use it to design their own websites and operating systems.
It can actually be done now, but soon, everyone, or anyone, will be able to do it.
This is when you will truly be able to outcompete any player in your market, even the big ones who can throw a lot of marketing dollars against you today. In the future, AI will level that playing field.
It is actually happening now, but nothing like five years from now, in my opinion.
Operational Strength Replaces Size as a Way to Dominate the Market
Smart decisions, access to data and the ability to make smarter decisions using it, along with being able to utilize AI either in current operating systems or in your own created systems, will give anyone operational strength in running their facility and/or business.
You can now run your monthly operational reports, P&Ls and balance sheets through AI, and not only can you see what dials and levers you can turn and pull, but you can even get specific suggestions on which vendors to replace and who to replace them with, facility by facility.
This is only going to be more accessible in the future.
We can, today, get suggested promotions of what units to offer specials on, what they should be, and who they should be targeted to.
We can get real-time suggestions on when it is good to refinance to reduce interest rates or mortgage payments and who to approach for the refinance.
This is just the tip of the iceberg.
No matter who you are or your size, this ability will allow you to dominate a trade area, regardless of your size.
The Future Rewards Better Decision-Makers
Believe it or not, there was a time when, almost everywhere, all you had to do was build some storage, run a Yellow Pages ad, and then turn the lights on in your office and voilà…you rented up.
I remember those days. Yes, there were issues to deal with, like getting financing, but for the most part, it was easy. A not-so-smart person like me could even rent fast, covering all the dumb mistakes I made.
Those days are now in the museum of self-storage. Yes, we need something like the Rock & Roll Hall of Fame in Cleveland, or the Blues Museum in Memphis, or the Bluegrass one in Owensboro, KY.
Trade area by trade area can all be in different parts of the real estate cycle today. Some are in expansion, some are in overbuilt status, some are in equilibrium, and some are ripe for more storage.
The owner/operator of the future knows where and when, market by market, trade area by trade area, where to strike.
Are you ready for the future?
The future is here now to a large degree.
We are adjusting our business to function in this future today.
