The self storage market is booming (that’s probably one of the reasons you decided to get into the business, right?) According to a self storage industry analysis by Mordor Intelligence Research, the market valuation reached more than $87 billion in 2019. Self storage research also indicates that the market is expected to grow to $115 billion by 2025!
While the coronavirus gave self storage rentals a boost (many people and businesses needed to downsize due to the pandemic-inspired recession), the industry has been trending upwards regardless as urbanization increases and individuals and families move into smaller spaces.
8 Self Storage Market Trends
To keep you in the know when it comes to what’s going on in the self storage industry, we’ve identified the top eight trends you’ll want to stay on top of.
1. Increasing Competition & Consolidation
The self storage industry has traditionally been highly fragmented, but with the demand for warehousing growing, publicly-traded real estate investment trusts (REITs) are moving in. Today, they own about 20% of the self storage market and while that may not seem like much, their financial backing gives them a lot of power. They’re able to provide lower rents to customers and take advantage of internet marketing and per-click advertising, spreading administrative and operating costs across their large portfolios. This really puts the pressure on independently-owned self storage companies to step up their game.
Some mom-and-pop self-storage facilities, unable to compete with REITs due to a lack of finances and resources, are allowing themselves to be acquired by them. Even though they lose their independence, growth-hungry REITs may make offers that are too good to refuse. Of course, this results in increased market share and brand awareness for REITs. For small self-storage operators who want to maintain their independence yet still have the ability to compete with REITs are now considering the Storelocal self storage cooperative (see #8 for more).
2. Valet Self Storage as an Ancillary Service
Valet self storage or “full service self storage” was once thought to be the next big thing. Companies offering this service would pick up their customers' belongings from their home or office for an added fee, and may offer to wrap and pack items and store them in a climate-controlled environment. The concept never fully took off, however today many self-storage facilities are offering valet service as an ancillary service. For facilities in high-income areas, or areas with a lot of profitable businesses, offering valet self storage as an option can help bring in customers who value convenience.
3. Changing Management Styles & Customer Service
The management style of many REITs is “hands off,” involving little personal contact and interaction. While some customers prefer this management style, it comes with a lack of customer service. That’s where mom-and-pop self storage facilities are differentiating themselves. They often have a good, friendly rapport with their customers and provide superior service.
In addition, by offering ancillary items such as moving vehicle rentals, moving supplies, insurance, and a variety of boxes, they can further show their value. Of course, they still need to keep up with the times. Today, self storage companies that can balance automation and technology along with personal customer service, such as helping people choose the right storage unit for their property, will be the most successful.
Back to automation that we just mentioned. With increased automation, there may no longer need to be a full-time property manager on-site which can save money. How does it work? Take the NOKĒ® Smart Entry system, for example. NOKĒ (“no key,” get it?) is a Bluetooth electronic lock and total access control system that allows customers to access their self-storage facility and individual unit from their smartphone. No more lost keys, no more forgotten gate codes – customers simply use their phones to gain access and share “digital keys” with friends, family members, or anyone else who needs to grab an item from the storage unit.
There are other useful technologies for self storage facilities as well, such as online apps. These apps can provide owners with valuable customer data, but also allow users to pay bills, see move-in and move-out dates, report an issue via photo, view a live feed of their units, and more.
5. Understanding Generational Similarities
In the past, some independent self storage facilities hesitated to adopt the new technologies just discussed because their operation catered to baby boomers; these boomers may have recently become empty-nesters or were retiring and looking to downsize, requiring a self-storage unit. The thought was that this generation would prefer personal interaction and thumb their nose at automation and new technologies.
However, research into baby boomers' use of technology shows that the portrayal of boomers as an analog generation is outdated. Baby boomers now support digital innovation, and while the pandemic helped increase tech adoption among older generations, usage of digital channels was already trending upward before COVID-19. Pew Research Center data from 2019 shows that the majority of baby boomers now own a smartphone (nearly 70%).
So, self storage operators should not be afraid of adopting new technologies (Bonus: In doing so, they’ll also have more appeal for the younger Millennial and Zoomer generations who grew up with these technologies and have come to expect them). Of course, there’s still something to be said for face-to-face contact, so it’s up to the owners to strike the right balance between personalized service and automation/technology.
6. Alternative Use of Space (Ecommerce Businesses)
Self storage facilities have become a great place for ecommerce businesses to store their goods, a “hub” between the production of products and the shipping of products. According to BBC News, running an ecommerce business from a storage unit is also a growing trend, since self storage units can be whatever size someone needs, people are typically not subject to business rates/taxes (the storage company pays, at cheaper “Warehouse” rates), and rent is a fraction of the price compared to renting a storefront of a similar size.
Not all kinds of businesses can be run from a storage unit of course, and the Self Storage Association addresses this. However, independent self storage facilities with vacancies may want to advertise this as an option if they don’t mind customers frequenting the unit.
7. Location & Aesthetics
Self storage facilities used to all look the same: Rows of single story metal buildings painted orange or yellow. The times they are a-changin! Today, many self-storage units are designed to blend in with their surroundings, complementing the neighborhood architecture. They may feature upscale exterior designs and eye-catching landscaping.
For some facilities, it’s not even an option; in recent years, neighborhood associations have demanded certain designs in order to avoid development of an “eyesore” in their area. This means that today’s self storage operators need to look carefully at the area they intend to build in to be sure their design fits in with the landscape (this will also help ensure customers come in for business).
10. Storelocal® Self Storage Cooperative
Some self storage independents simply can’t complete with REITs – but don’t want to merge and lose their independence, or close down altogether. Today, many are turning to Storelocal, the nation’s only self storage cooperative. Storelocal consists of a large group of independent self-storage operators who have banded together to compete against the larger REITs.
While each member remains independent, by combining their strengths, they are able to increase competitive advantage, gain exclusive deals on vendors, lower operational costs, and partner with self-storage industry thought leaders. Storelocal also offers a voluntary Storelocal Branding Program, which allows independent facilities to use the Storelocal brand to gain more visibility online and other benefits. Read more about it here.
Keeping Up with Today's Self Storage Trends
There you have it, our list of the top eight trends in the self storage industry today. As trends keep changing, we’ll keep you updated, so be sure to subscribe to our blog. And, if the idea of joining a self storage co-op interests you, be sure to read more about Storelocal and the value we can to your business. Today, with more than 1,300 members and a real estate value worth more than $10 billion, the Storelocal co-op is stronger than ever – and you're invited to become a part of it. Contact Storelocal to learn more about what our cooperative can do for you.