I have said before about self storage, “Make data-driven decisions.”
I try to do that.
But it’s getting hard. Real hard, in my opinion.
In my humble opinion, there are two big issues with data today in the self storage industry.
The first is how it is collected, and the second is the conclusions drawn.
Data Collection
I really think we need an entirely new industry that collects data on how other companies collect data.
Let’s look at an example. One of the big real estate companies produces lots of data and reports on multiple product types they sell, like self storage.
If you want to know the vacancy rates in, for example, Nashville, they have a report that covers that. So, you look at their report, see a 10% vacancy factor in that market, and begin to make decisions based on it.
Should we focus on that market or not?
Well…if my new industry was in existence, the one that collects data on people who collect data, and you used them, you would see something very interesting:
This company producing the report on vacancy rates in Nashville only uses vacancy data from “stabilized facilities” in their vacancy metric.
It would be too low, I guess, if you actually took every unit available and then calculated how many are vacant to get a “vacancy report.”
But I suppose there is some rationale that smarter people than I have that makes sense not to include projects in lease-up.
It’s getting to the point that I question everything I hear, and it’s making me seem cynical to myself. I don’t like that.
I was on a webinar last week and was told that the New York supply pipeline (what does that word mean to you) increased .70 basis points (sounds bad) to 17.7% of the existing stock (that sounds bad). In the next breath, it was that New York has 3.3 square feet of self storage per capita (that sounds good). New York has historically been one of the most undersupplied markets (that sounds really good, but I’m still worried about the pipeline and all). Then in the same sentence, I found out that street rates have fallen (sounds bad) steadily to 5.1% for a 10 x 10.
Now is New York a good place to be focused on or a bad one?
And the falling street rates of COVID-19. I love that one. How do you think “street rate data” is “mined?”
From websites.
Now, do you rent every unit from the web rates?
We sure don’t. If they rent from the website, they can get that rate, but if you drew a proforma on one of our facilities from prices on the website, you would be way off.
Not to mention that the easiest web sites to hit are the REITs who use dynamic pricing, which really means nothing as far as “street rates’ go. The street rate to get someone in one of their facilities will not be the same street rate they are paying three months later.
Interpreting The Data
I really think that the data collection people who make predictions about the direction of the industry are like the fortune-tellers of yesteryear.
Instead of throwing bones on a table, or reading tea leaves, they interpret data.
Don’t get me wrong, you have to use something, but I never hear any of the prognosticators informing us about how the data was collected and the potential accuracy, or non-accuracy of the data.
Even something as non-controversial as sq. ft. per capita, in my opinion, is questionable now. Think about it., the data used today is from census data collected in 2010, then extrapolated forward.
Hopefully, soon, the 2020 census data will be collected and start being used. But in reality, how accurate do you think it is? How many of you filled it out? I had to get a PPP loan, but I wonder how many did not fill it out. Especially people who, for whatever reason, are mad at the Federal government today.
I really think it is in our best interest to dig deeper and not just accept data handed to us.
How was it collected, who collected it, and how big was the sample group? For that matter, who was the sample group. If you are drawing conclusions from REITs, which much of the “street rate” data is (because their web sites are easy to monitor), at best, I think they are pointing to a directional trend. To say “street rates” are down 6% since January 2020, or something like that, is very misleading. Yes, they may be down, but I would bet something on the exactness of 6%.
But yet, on these webinars, these statistics are bantered around like the truth. Industry trends are deduced from them, and many companies are making pricing and other decisions based on them, never questioning how the data was collected, and other possible inferences it could point to.
As business owners, we need to start thinking for ourselves more. We should not just blindly accept what we hear or read in print.
I use the data I research to make decisions, but I am not just accepting it on face value anymore. I am digging deeper. I wish how the data collected was easier to see, but even if that doesn’t change, you can usually find it out yourself.
My coaching is to do it, think through what that could mean, don’t just blindly accept what the data means from people, and think for ourselves more.
We are swimming in data. Sometimes, too much data. Let’s start filtering out the flawed data collection methods and think more for ourselves.
Also, perhaps we can start that new industry—data on the data collectors.
My next new industry will take on politicians after this new data on data one. Perhaps someday, when a politician speaks, rolling behind them will be who their corporate contributors are so that you can get some context around the policy decisions they are making.
But for now, I’ll focus on self storage data.
