As is the case with any industry, there are trends that are shaping the future of self-storage. And many of the factors affecting and driving the trends seem to be in line with many other industries; the age of the consumer, automation, and convenience.
One of the hottest topics in the self-storage market has been the rise of valet-storage startups. These companies pick up customers' items from their homes, store belongings in a secure warehouse and return them upon request. The price differences between a traditional storage facility nearby and a valet operator storing at a more remote location allows valet-storage operators to offer services at competitive rates, while still providing an on-demand experience. The valet-storage business model is currently only viable in markets where there is a significant difference between the rental rates of facilities in city hubs compared to those in more industrial neighborhoods. For example, it’s common to see self-storage rates in Manhattan, N.Y., that are 400 percent higher than those at a nearby Brooklyn location. However, in a market like Fayetteville, N.C., the difference between city-center rates and those of facilities in a nearby suburb may be less than 20 percent.
As Millennials gain spending power, their consumer behaviors and preferences are shaping how companies market and conduct business. Millennials are accustomed to accessing apps for all manner of services, and storage is no exception. As the use of these apps becomes more mainstream, and as these younger consumers continue to amass storable goods, there will be significant pressure on self-storage operators to reduce prices. This will particularly affect investors and owners who have focused for decades on purchasing and developing self-storage facilities in highly desirable urban markets.
Another major trend in self-storage has been the increased adoption of automation. As a strategy to leverage technological advances to increase operational efficiencies, many self-storage operators are fully or partially automating their properties. Proponents of this strategy claim that automation can significantly increase net operating income, most notably by eliminating the salary of an onsite property manager. However, this strategy comes with a potential downside.
It’s very unlikely that an automated system will be able to effectively up-sell customers on premium products such as larger units, climate-controlled space or drive-in access. Additionally, kiosks may not be able to sell ancillary-income items like truck rentals and tenant insurance as effectively as a human. In other words, in some cases, you actually get what you pay for.
The Baby Boomer phenomenon creates a unique data set when analyzing the self-storage industry. There are 10,000 Baby Boomers hitting the age of 65 each day and projected to do so for the next 15 years. It’s very likely that this demographic shift will result in continued, significant downsizing among this generation over the next several decades. This should be positive for self-storage investors and owners, as downsizing is one of the most frequently cited reasons for customers to use self-storage.
Whatever type of self-storage business you may operate or own, it is important to continually monitor the trends and changes in customer behavior that may impact your business.