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.