Portable Storage: Understanding the Money, the Market and the Potential
|Copyright 2014 by Virgo Publishing.|
|By: Steve Hajewski|
|Posted on: 08/14/2009|
By now, most consumers are familiar with the concept of portable storage. The industry’s most visible operator, Portable On Demand Storage (PODS), has nearly reached the status of being a household name like Xerox or Kleenex.
Many self-storage investors and owners are also considering portable storage. But before you open a site or expand an existing business, there are several aspects of the product to consider. Portable storage is a dynamic industry, but it’s very different from traditional storage.
When comparing portable to traditional storage by the numbers, you quickly see they’re very different animals. Both types of storage require a significant investment up front, whether in land and buildings for traditional self-storage, or containers and transportation equipment for portable. Portable storage will also require warehouse space, but due to the nature of the business, leasing is an option.
Differing financing terms make it a little more complicated to directly compare the two types of storage. Lenders usually offer a 20-year loan on traditional self-storage facilities, while portable operators will find their units and equipment are eligible for loans of three to five years. Managing the cash flow on a new portable business can be a challenge, but since the assets may be in service for a decade or more after the financing is repaid, you should make decisions based on a time period beyond the loan.
Portable storage can offer owners some tax advantages over traditional storage, too. Since the units are not permanent buildings, they’re not taxed as real estate improvements. Additionally, portable units may be depreciated faster than traditional buildings—as quickly as five to seven years. (Check with your tax professional.)
Traditional storage depreciates over 39 years but offers a significant advantage upon resale, as a fixed site generally appreciates in value as a business. Portable businesses can be sold, but don’t have the track record.
Location, Zoning and Phasing
Developing a portable-storage business brings a new twist on some familiar topics. In traditional storage, the right location with the proper zoning is a key element. With portable, the central storage location is important for different reasons. Drive-by traffic helps during the initial rent-up, but a location that allows for efficient delivery to your target population is also imperative. With portable storage, your own location needs to be zoned correctly, and the customer’s property must also allow for temporary storage. In some communities, there will be limitations or permits required.
The development of portable storage can be riskier than that of traditional. Because it’s a newer business model, there’s simply less history and industry information available to help you make informed decisions. Conversely, as a newer industry, portable storage offers entrepreneurs the opportunity to be the first in their markets or pioneer their own twist on the service. When portable is added to a business that already owns transportation equipment or storage space for another purpose, the risk can be greatly reduced. Portable units can be a great companion business for a towing business, for example.
Getting up and running with portable storage can be a much faster process than with a traditional storage site. Domestic suppliers can provide containers in just a few weeks, compared to the months or even years that go into planning and permitting a new building. Phasing is as simple as ordering a truckload of containers as needed once the initial warehouse or storage yard is in place; expanding your fleet takes just a phone call.
Operations and Marketing
By its nature, portable storage is a far more labor-intensive business. While traditional storage defines itself as a lease on space, portable storage adds delivery services. Scheduling becomes much more important in managing a portable business, compared to a fixed site where customers come and go through an automated gate.
In most cases, a driver is required, and department of transportation laws and regulations must be followed. It’s possible to ease into the business by subcontracting the transportation; however, in doing so, the portable operator loses control of what may be his only face-to-face contact with the customer. Efficient management of the delivery service can be the difference between making or losing money.
Typically, traditional storage draws customers from 3 to 5 miles, with visible doors a key source of business. Portable storage serves up to a 30-mile radius, greatly expanding the potential customer base. Containers in service, branded with the business logo, phone number and website, serve as important marketing tools.
Regions of the country may report different busy times for traditional self-storage. Portable storage also has a busy time. About half of all moves happen during the summer months when school is out, so a spike in portable business is typical. Remodeling and home renovations are another source of business for portable operators, and a decline during the holiday season is to be expected. Traditional storage generally sees longer-term rentals, which helps create a more stable occupancy level.
If you’re thinking of expanding or opening a new site, consider all your options. Aside from portable and traditional storage, there’s also micro/movable storage, which could be considered a step in between. Micros can be moved with a forklift when empty, allowing flexible placement without a foundation.
Both traditional and portable-storage organizations exist to offer education. As with any business, the key is to provide the right product to the right people, at the right price and the right time. The trick is to know what’s right before making that big investment!
Steve Hajewski has been the product development manager for Trachte Building Systems since 2005, leading the development of the company’s portable product line. He now also serves as Trachte’s marketing manager. For more information on the company’s line of portable-storage products, visit www.trachteportables.com.