1. Private Mini Storage is the price leader. In Atlanta, it charges an average of $105 per month for its regular 10-by-10 units, which is a 54 percent premium above the $68 per month average rate in metro-Atlanta. Private Mini replaces Shurgard, the former price leader, which dropped to spot No. 3 and charges $88 per month for its 10-by-10. Private Mini also has the distinction of operating the facility with the highest 10-by-10 rental rate in all of Atlanta: $180 per month for a climate-control unit.
2. Large operators charge much higher rates. Atlanta has 17 large operators, defined in this survey as owners or managers who operate seven or more self-storage facilities. These 17 operators average $81 per month for their regular 10-by-10 units compared to only $60 per month by their smaller counterparts. This is a remarkable 35 percent premium obtained by large operators and raises a chicken-and-the-egg question: Did large operators cause high rents, or did areas that already had high rents attract large operators? To find an answer, the survey investigated whether large operators obtain similar premiums when located near smaller ones.
|LARGE OPERATORS: 10-BY-10 RENTAL RATES|
|Private Mini Storage||$105||$160|
|Devon Self Storage||$94||$109|
|Stor-All Systems Inc.||$82||$112|
|Ark Self Storage Centers||$74||$128|
|Colonial Storage Centers||$70||$110|
|Your Extra Attic||$70||$95|
|Attic Self Storage||$63||$92|
|Average Large Operator||$81||$102|
|Average Small Operator||$60||$96|
3. Large operators charge more than smaller ones within the same area. Look at the following chart, "10 Metro Areas With the Most Self-Storage." Out of 86 communities that have self-storage, the top 10 hold 40 percent of all facilities and 60 percent of those managed by large operators. Rates for 10-by-10 units in the top 10 communities are generally high ($77 per month), but in two communities (Covington and Gainesville), rents average only $53 per month. Not surprisingly, there are no large operators in these two communities, although there are 33 facilities. Large operators, therefore, do not necessarily enter the highest concentration of self-storage.
If you segregate rates between large and small operators in these 10 communities, in every case but one the large operators charge more than smaller ones. In the cities with the highest concentration of storage, large operators average $83 per month vs. $71 per month for small operators. While this may be evidence that large operators can obtain premium rates, it is possible higher rates result from some other factor such as traffic count, demographics, age or quality. In support of the argument that rates are determined by factors other than management, the premium for large operators over small ones is only 6 percent at facilities with climate-control units, which are presumably newer, well-located and higher-quality, regardless of the type of management.
|10 METRO AREAS WITH THE MOST SELF-STORAGE|
|City||# of Facilities||# of Operators Large||# of Operators Small||Rental Rates Regular||Rental Rates Climate-Control|
4. The premium for climate control is 27 percent and dropping. In Atlanta, the premium for climate control over regular units is 27 percent compared to 32 percent in 1999. This premium is measured by comparing only facilities that offer climate control and regular units, excluding other factors such as age, security, traffic count and appearance. If you compare the average rate for a 10-by-10, climate-control unit in Atlanta ($100 per month) to the average 10-by-10 regular unit ($68 per month), the apparent 47 percent premium for climate control is misleading.
Part of the premium has nothing to do with climate control but is due to the fact climate-control facilities are generally newer, better looking, better located and safer than ones built 10 years ago that cannot command high rates even for regular units. In fact, the average rate for regular 10-by-10 units at facilities containing regular and climate-control units is $77, which is $9 per month above the overall average. Having climate control may not add to the rate for a regular unit, but generally indicates the facility is newer and may have features associated with newer projects.
5. East Point is neither a wealthy nor a fast-growing residential area of Atlanta, but it charges the highest rental rates, including $129 per month for regular 10-by-10 units. It replaces Roswell, which has superior demographics but fell from first place, in 1999, to fifth place as developers restored the balance of supply and demand. Looking at the map of self-storage locations, East Point appears undersupplied with self-storage compared to other parts of metro-Atlanta. If you are interested in creating a similar map for another city, demographic programs will produce maps locating the positions and names of facilities.
|Monthly Cost per 100 Sq. Ft.|
|National||10x10 Self Storage, Regular||$59|
|Southeast||10x10 Self Storage, Regular||$59|
|Atlanta||10x10 Self Storage, Regular||$68|
|National||10x10 Self Storage, Climate||$99|
|Atlanta||10x10 Self Storage, Climate||$100|
|Southeast||10x10 Self Storage, Climate||$105|
6. Same-store performance beats the averages. Since 1999, rental rates for facilities in both surveys rose $5 per month. This is superior to the overall average, which rose only $2 per month. There are two possible explanations. First, in 1999, some facilities may have been in lease-up and charged low rates to purchase market share. Presumably, by 2002 their lease-up would be complete, and rents could be raised. Second, the exhaustive 2002 survey uncovered many small, unadvertised facilities. Their very low rates were not in the 1999 survey and lowered the averages in 2002. Either way, an increase of $2 per month in the overall average or $5 per month for same-store sales indicates a healthy marketplace.
7. Self-storage rates are comparable to apartment rents. A three-bedroom apartment in Atlanta costs roughly $680 per month for 1,000 square feet. This is equivalent to a regular 10-by-10 unit at $68 per month, except self-storage does not have to offer climate control, water, heat, electricity, plumbing or periodic replacement of appliances, carpeting or wall treatment. A similar study performed earlier by this author compared rental rates at 463 Atlanta apartments to those of their nearest self-storage facility. The study showed a correlation between apartment and self-storage rental rates and concluded it would often be less expensive to rent a third bedroom in an apartment than to rent the nearest non-climate-control self-storage.
8. Atlanta's self-storage marketplace is healthy. According to the 2002 Self-Storage Almanac, the average U.S. rental rate for a 10-by-10 is only $59 per month, which is $9 per month below Atlanta's rate. During the past decade, Atlanta's population grew at a remarkable pace of 5 percent per year--about five times the national average--creating a demand for self-storage. The marketplace for buying and selling self-storage in Atlanta is also active and strong.
H. Burton Gay, a self-storage specialist at real estate brokerage firm Marcus & Millichap, has brokered 40 self-storage purchases and was formerly a CPA at Coopers & Lybrand. In addition to serving on the advisory board of the Georgia Storage Owners Society, Mr. Gay holds an MBA in finance from The Wharton School and recently received his Certified Commercial Investment Member designation in commercial real estate. A full copy of the Atlanta rent-survey booklet is available upon request. For more information, call 770.393.1700; e-mail [email protected].