As a real estate professional and a self storage owner/operator, I am now clear on two things that have emerged from the COVID-19:
- The office sector will never be the same.
- Self storage can be leased with minimal customer interaction.
Office
I am clear that as the “crisis” moves through its spaces until a vaccine is created, and even when it is “over,” we have learned we don’t need the amount of office space we have traditionally used.
Many people and companies learned we are just as productive, if not more, without having to travel to an office to do so.
We will probably sell our 5,000 square foot office condo that houses all our companies and somewhat downsize (if not completely downsize).
I feel that many units in our facilities will soon be filling with office furniture from downsizing companies.
I am grateful I am not heavily invested in the office sector. Keep your eyes open for office buildings that can be converted to self storage.
Self Storage
I have also learned that we can lease units with much less customer interaction.
Even boomers are getting used to doing things virtually.
This brings me to the real topic of this episode, which is that, no matter what size your facility is, you can probably run it with less payroll.
Payroll has always been our largest single line item in most projects (sometimes property tax gives it a run for its money and wins). The Age of Coronavirus has taught all of us we can most likely run with less.
And given the fact marketing cost are going back up, rivaling the days of yellow pages, (unfortunately in my opinion) I think we are all going to see a lot fewer employees providing customer service in the industry.
Customer service of the future will be measured by the number of clicks it takes or the speed at which representative return calls, or some similar metric.
The Good Old Days
When I first got into the business, our company would generate about $250,000 of gross income per full-time employee.
From 2017 to 2019, that number for us was between $330,000 and $350,000 of gross income per full-time employee.
Technology and online solutions created that improved productivity.
So, for us, it was not as big a jump to have “virtual move-ins” as standard operating procedure as many other smaller operators.
However, this has proven to us that we can most likely reduce our payroll cost even more.
And I am sure we are not the only industry.
I wonder what will happen if the only “jobs” will be for the engineers to keep the technology rolling that replaced everyone working?
Will there be money then?
Well, that is another episode and outside the scope of my “expertise.”
Future Of Our Self Storage Company
But I am clear that our payroll per facility will go down over the next few years, and our marketing and tech cost will go up.
This decline in payroll expense does not necessarily mean we will be a “Managerless” company. It just means that our Managers will be able to cover more ground and have fewer employees.
The real art will be our ability to anticipate the times where in-place customer service will make the difference.
We have learned, for example, through the use of kiosks, each facility has its unique downtimes. There are certain days and periods in a month, where employees don’t need to be in the office.
This means our company’s payroll line item is going down, and productivity per employee is going up.
Unfortunately, at least at this moment in time, that reduced cost does not translate into a higher NOI (net operating income), because our marketing cost, tech cost, and property tax lines items are going up faster than payroll is going down.
But remember, everything has its time, and soon, as the population grows, the supply of new self storage slows down, we will be able to translate the payroll savings into profit.
So as we plan for the “new future,” this is how our company is modifying its approach to payroll and running our facilities.
