Statistical Strength

Jim Stratton Comments
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Vehicle storage is a fast-growing niche in the self-storage industry. Many articles address design, construction and operations, but little has been written about measuring demand for RV and boat storage. Too much time and money is at risk to build without knowing a market awaits.

The science of determining vehicle-storage demand is still being developed, but through experience, we’ve learned to first ask key questions:

  • What is being stored?
  • Who is the customer?
  • What bundle of features make up the product?
  • What is the best location for vehicle storage?
  • How big is the primary market?
  • How do you determine demand in your primary market?
  • How many competitors are there, and what do they offer?
  • How can your facility best compete?
  • What is your absorption potential?

Stored Items

RV and boat storage encompasses motor homes, travel trailers, campers, off-road vehicles, jet-skis, snowmobiles, boats, utility trailers, commercial trucks and trailers, industrial equipment, antique and collectable cars, and personal vehicles stored when owners travel for extended periods. Sometimes law-enforcement agencies store impounded vehicles at commercial facilities. Just about anything on wheels (and some without wheels) can be found at an RV- and boat-storage facility.
 
Customers

It’s possible to measure some owner classes. These include RV owners, boat owners, trailer owners, numerous businesses, car collectors and restorers, people who might be transferred overseas for months at a time, government agencies and private organizations. Depending on the services and amenities they expect, the groups can be further broken down.
 
Storage Features

What will you offer vehicle-storage tenants? Every customer’s needs are different, making it impossible to bundle facility features in a one-size-fits-all fashion. Renters decide whether to store at your site based on a number of qualifiers:

  • Unit size
  • Protection from environmental elements
  • Security features
  • Unit accessibility
  • Convenience of location
  • Vehicle-related services
  • Price
  • Lease terms

Some tenants are OK with uncovered storage; others expect the works­—enclosed, climate-controlled space with valet services.

Finally, vehicle storage is usually teamed with traditional self-storage or auto-boat services. Some customers will patronize your site for the convenience of storing vehicles with household belongings and—if you go the distance—having their RVs serviced at the same place.
 
Location

What’s a good spot for vehicle storage? While there is no magic answer, several preferred locations have emerged:

  • Resort- or destination-oriented locales, which cater especially to RVs and boats
  • Suburban and small towns, accommodating a range of vehicles
  • Urban areas, which usually attract vehicles other than RVs

When shopping for sites, keep your eyes open for property that has good visibility, easy access and the right price.
 
Market Size

Make sure you set up shop in a locale attractive to visitors and booming with potential tenants. For example, resorts often draw customers from a wide market. Tenants might live hundreds of miles away, picking up their RVs at the beginning of the season and storing them at the end. Many own two homes.

Suburban and small towns serve more localized markets but may draw people within a 10-mile radius. An urban vehicle storage facility is likely to serve a much smaller primary market area—probably no more than five miles in radius—due to congestion.

The primary market is defined as the geographic region that attracts 65 percent to 75 percent of customers. The locations of major competitors, road patterns and natural features will also influence the size and shape of your primary-market area.

The next step is to investigate the number and type of vehicles owned by residents in the area:

  • RVs, by type and size
  • Boats, by type and size
  • Personal recreational vehicles (jet-skis, snowmobiles, etc.)
  • Antique vehicles
  • Personal utility trailers

Vehicle- and boat-registration data should be available at state departments of motor vehicles or licensing. You will have to apply the information to your specific market.

Also research the number of vehicle owners who get transferred overseas each year (military, corporate). Finally, track down companies in industries using commercial vehicle storage through ZIP code, and inquire about local government agencies and institutions (churches, schools) that may need to store buses or other vehicles.

Once we have these numbers or reasonably good estimates, the next step is harder: What is the probability these potential customers will actually rent a storage unit?

This is difficult to estimate because research into vehicle storage is in its infancy. Using national statistics, the Self Storage Almanac estimated 1.9 million RV/boat commercial parking bays associated with self-storage facilities in 2004. The RV Industry Association and National Marine Manufacturer’s Association tallied approximately 25 million RVs and recreational boats in the country during the same year.

The ratio of parking bays to RVs and boats was 7.6 percent, which could be used as a rough estimation for RV and boat owners in any area to use commercial storage. Unfortunately, that figure isn’t entirely accurate.

The good news is vehicle-storage demand exceeds supply in many areas across the country. Plus, demand is growing, based on increased sales of vehicles and growing restrictions on where they can be parked. Therefore, the number of RV and boat owners using commercial storage is probably around 11 percent; the proportion of landscaping and other big-vehicle companies that store may be much higher.

Another tactic is to take the calculated demand for RV and boat storage (11 percent of the market’s RV and boat inventory) and assume it represents about 80 percent of the total demand within the market. That is, the additional 20 percent comes from other vehicle types. This ratio could go up or down based on specific market characteristics and location.

While far from perfect, this approach does provide a means for estimating demand but should be cross referenced with a competitive supply analysis of the market, county or region. Also keep in mind that 25 percent to 35 percent of the demand likely originates from outside the primary market.
 
Competition

A facility up to 12 miles away can have an impact on your market. Your chief competitors will be listed in the Yellow Pages and Internet. Map and visit them. Note the quality of the location, ease of access and visibility. What kind of security is provided? What kind of storage (open, covered, enclosed)? What’s the mix? Rents, services and amenities? What is the occupancy rate? What are the strengths and weaknesses of the facility?

Conversing with managers, try to learn about the seasonality of demand—look at vehicle type and unit size—and also whether they know future competitors in the area. And, don’t forget to check with local planning and zoning offices about other projects on record.

Remember the tools for projecting demand are still crude. If all competitive facilities are full and the projection shows the area is oversupplied, some adjustment is needed. Just be careful not to adjust so much that you “prove” more demand than what exists. This takes a lot of prudent judgment.

If your in-depth research reveals the market is saturated or a new facility is in the works to soak up overflow, you’ll have to move on and find another area ripe for development. Hopefully, you’ll find a hole in the market to fill. Then, analyze what kind of facility you should build, the mix, services and pricing.

The important question to ask is: Are there any niches or services the competition has overlooked? If your location, quality and services are superior, you’ll probably lure some tenants away—maybe 10 percent to 20 percent. The remainder will come from outside the primary market.

In the end, what market share should you expect to capture? Plan for at least an even share distributed among all the competition—20 percent for five facilities, for example. Just don’t overlook the other players’ size and strengths. Some may have the capacity to seize only 10 percent, whereas you could potentially nab 50 percent.

Does that mean you will? Not necessarily. It depends on location, facility quality and rents as well as the intangibles of marketing, salesmanship and management.
 
Jim Stratton has been providing market research and feasibility studies for real estate developers since the early 1980s. A substantial part of his work is in the storage industry. For more information, call 504.866.7696; e-mail jds737@earthlink.net; visit www.stratton-research.com.

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