Overcoming Self-Storage Development Hurdles in Canada
Copyright 2014 by Virgo Publishing.
By:
Posted on: 11/11/2013



 

By Molly Bilker

The Canadian self-storage market is handicapped by limitations on development. Saturated markets mean higher land costs. Building codes and guidelines are stricter than those in other countries and can cause costly changes in development plans.

Despite such setbacks, the market continues to expand, and self-storage is finding a footing in rural areas and small towns where it was once unknown. In addition, rental rates are gradually increasing and demand is picking up, says Marc Goodin, a civil engineer and owner of Caraquet & RV Storage in Caraquet, New Brunswick, Canada.

The Rising Cost of Building

Though the Canadian self-storage market regularly sees new development and an increase in renters, builders face a number of challenges. In some areas, land prices are rising because the markets are flooded, explains Jamie Lindau, sales manager for Trachte Building Systems, a U.S.-based developer that works regularly with Canadian facility owners and investors.

Inflating land prices raise the break-even analysis, which includes the combined costs of development and land, and returns become more unstable. As such, more money is needed for the down payment, Lindau says. "The availability of money is there, but you need a lot of capital yourself to get into the business.”

Rigid development guidelines also inflate building costs. Development is guided by building codes, which can vary greatly depending on the region. For example, there’s a requirement in Saskatchewan that firewalls must be added between all units or sprinklers should be added inside the building. For this reason, Lindau says, most developments in the region are all single-story to scale back on the expenditures. "The cost to develop is a lot higher, but also, the rental rates are higher," Lindau notes. "The cost is easily 30 percent more [to build] than in the United States."

In British Columbia, however, development costs have dropped. Prices are alleviated by the province's abandonment last April of the harmonized sales tax. Now that the tax has been rescinded, storage rents are once again exempt from the 7 percent sales tax, which is still in effect in Labrador, New Brunswick, Newfoundland and Nova Scotia.

Migration Continues

The migration of residents about the country for personal or professional reasons also spurs new development. Saskatchewan's government and business practices have transformed in light of the province's oil-shale boom in recent years, which has caused more people to move there. With more people comes higher storage demand. "Where the people are moving to is where it looks like there's opportunity for development," Lindau says. "The Maritime Provinces might be closer to saturation, or areas like large cities in Ontario might be overdeveloped. Not everywhere is a great place to build. You have to check it out."

Other trends have begun to emerge. More developers are building climate-controlled units with radiant floor heat to keep them warm during the frigid Canadian winter. Multi-story facilities and conversion projects are becoming a trend in large cities, where self-storage operations are concentrated as well.

Smaller towns are also starting to develop self-storage. “Canada is starting to catch up with the U.S.,” Goodin says. Nonetheless, people in rural areas still don’t know enough about the values and uses of self-storage, according to Goodin, and operators and developers will need to continue to educate them through marketing efforts.

Marketing Is Key

Technology has had an impact on the Canadian market, where proximity to the population and an Internet presence are beginning to outweigh the advertising power of street visibility. Goodin stresses that the Internet is a critical part of being a market leader and successful self-storage operator. His facility's website offers an overview of the business, and customers can rent a unit online. Goodin also maintains a Facebook page and participates on Pinterest.

Self-storage owner Marc Goodin outside Caraquet & RV Storage in Caraquet, New Brunswick, Canada.The potential customer’s ability to search for self-storage via GPS and mobile devices allows him to find out which facility is closest to him, making closeness to a high-density area more important to operators than conventional marketing, Lindau says. Community marketing is also critical to bringing in new renters. Caraquet & RV Storage visits local businesses and participates in local events. This helps the company get in touch with residents who may need storage solutions.

In fact, many Canadian self-storage operators are reaching out to their communities by participating in events, donating money or offering local charities the free use of a storage unit. This spring StorageMart properties in Alberta, British Columbia, Ontario and Saskatchewan acted as donation centers for the nonprofit organization Skate to Great. This summer, Apple Self Storage held a "Meat & Greet" event for the Kingston Interval House for Women and Children in Crisis in Kingston, Ontario. All Canadian Self Storage hosted an event featuring a speech from the Canadian Prime Minister, and Vanguard Self Storage sponsored a car race at the Peterborough Speedway in April.

Community and customer connections may be the most important part of self-storage success in Canada. "There's much hype on new trends, but a basic, quality facility, great customer service and wowing the customers are still the key to success," Goodin says.

Molly Bilker is a sophomore journalism major at Arizona State University (ASU) in Phoenix. She is part of ASU's Barrett, the Honors College, and is completing a minor in Spanish. She comes from an arts-focused middle and high school with a creative-writing background. She actively participates in the arts, including creative writing, guitar and vocal music, theater, photography, ballroom dance, drawing, and film. To reach her, e-mail mbilker@vpico.com.