I recently returned from the Self Storage Convention in Las Vegas and have had some time to digest what I learned there and organize it in my mind.

The first real take away I received was that the US economy is softening some. The trade wars are starting to have a negative impact on the overall economy.

We are not moving fast towards recession, but we are experiencing a real slow down on economic growth. I know what I’m doing Nov 2020.

As you can guess, the subject on everyone’s mind was OVERSUPPLY.

There was a lot of how did this happen. Some blame REITs. One speaker indicated that their third party management services allowed newbies in the industry to more easily get construction loans.  Who knows. But, oversupply was the discussion in every session.

Basically, we currently have enhanced supply of self storage for approximately the next three years.

Next we talked about which markets were “oversupplied” and “under supplied”. My take on some of the “oversupplied” markets, which I didn’t hear anyone talk about, is that most of them are also the fastest growing markets for population growth.

Most of the “oversupplied” markets, that have a lot of new storage as a percentage of the total elf storage supply,  in my opinion, are in a temporary situation. Keep your eyes on the Nashville’s. Charlotte’s, Denver’s etc. Population growth will solve the oversupply faster than most people think.

If you are in those markets, you are in a slow lease up with the ability to hold, don’t bail.

There are still markets like Phoenix and Las Vegas that have unmet demand. But remember, in the 2008 economic downturn, these are two of the markets that were hit very hard.

Secondary Markets

I just release an episode about the Secondary Markets. These are where the opportunities are for most of us.

Be sure to make sure that any secondary market you are considering have some population growth. It doesn’t have to be double digits or anything, but just make sure population is growing There are some markets where the population is declining. These are not good markets to bet on long term (and remember if you are in self storage, it is a long term product).

We are also looking for job growth in these markets. Usually population and job growth go together, but not always.

Concessions

If I ask you “who today gives the most rental concessions today, REITs or the privately owned self storage facilities like the ones we own?”, who would you say?

I said REITs.

I was wrong.

Their concessions have gone down and it is the smaller operator who is giving more income away as a whole today.

This is where strategic pricing strategies (to be discussed next week) are critical.

If you are like me (my wife says she hopes not), even though I have espoused “value pricing”, and we are using using metrics and data to adjust pricing, the future is going to require nothing short of a new way of relating to unit pricing.

If I am honest, I have an underlying belief that in a perfect world, everyone would be paying the same for a 10 x 10. I had it that, in a well run facility, everyone would be paying the street rate.

I didn’t really understand that was my underlying belief, but it is. At this convention that was questioned.

Why?

Why should everyone pay the same? Why should not some people pay more. Perhaps a lot more.

Yes, I know some units that were premium (not all 10 x 10’s are equal), but that was based on the units, not the people.

For this episode I will leave you with this question, should you charge someone who has been with you for five years more for a 10 x 10 than someone just moving in?

We will address this question that next week.

I realize I have some paradigm shifting to do to stay up with this industry.

Conclusion

Next year there will be a tapering off of new construction delivery. However, there are still a lot of conversions and expansions, like I love to preach about coming in some markets. In the last year about 20% of all new supply were conversions and expansions.

Just make sure you know your supply numbers for any in a submarket you are considering entering or expanding in. You don’t want to be six months behind someone else, unless there is tremendous demand.

It is good to go to these conventions and keep up on the industry. When I started, I used to say this is a very boring industry. The last big innovation was climate controlled space.

I don’t say that anymore.

If you think you have the answers and know what there is to know about self storage, you are soon to be irrelevant.

Keep up, be willing to change and grow, and have fun in this fantastic business.