Canadian Portable-Storage Industry Provides Opportunities for Operators Who Can Breach Obstacles

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By Foy & Co. Investment Real Estate Services

In Canada, portable storage has become an increasingly popular storage option for consumers. While it’s certainly not replacing traditional self-storage facilities, it is a growing section of the industry, offering an additional short-term storage option.

Having worked with a few portable-storage companies on acquisitions and financing, we’re impressed with this increasingly popular business model. That said, there are still points to consider before a storage operator decides to jump on the bandwagon.

1.      In Canada, the portable storage business is still somewhat in its infancy. The model is considered a cross between a moving business and a self-storage business.

2.      A number of self-storage operators are interested in this emerging segment, and a throng of companies are flooding the portable-storage market. As a result, margins will become increasingly pressured as businesses compete for profit.

3.      Portable storage requires warehouse space to store units, and the location of the warehouse is important. Owners generally look for convenient locations close to a major artery for effective access and efficient delivery to target populations.

4.      Staffing a portable-storage company is much more intensive than traditional self-storage. There are more logistics, and the number of trucks you own will factor into the number of clients you’re able to accommodate each month. Additionally the business requires more maintenance staff plus drivers, which increases overall scheduling and payroll.

Before jumping into portable storage, facility operators need to be aware of the initial hurdles and uncertainties that come with the emergence of this new industry niche.

Financing

Traditional loans continue to be hard to come by unless you have a very strong track record, personal guarantees, or the leverage is below 50 percent. There doesn’t appear to be a set formula for obtaining capital, and each bank has its own criteria. Loan terms can be quite specific, and self-storage hasn’t been on the radar for most banks when trying to match investment opportunity with corporate goals. That said, there’s been a slight increase in the availability of capital from banks compared to last year.

The biggest concern for Canadian self-storage is the amount of loans coming due in the near future, and lack of available funding options. Refinancing will be a struggle as primary lenders look only at the best deals, leaving the rest to find more expensive or alternative financing solutions.

Development

Portable-storage development projects that received financing before the economic downturn are continuing as planned. However, most projects appear to be focused on building additions to existing facilities rather than developing new ones.

Many development projects that failed to receive loans before the downturn have been shelved due to lack of financing. Finding capital has been a major stumbling block, and many groups have had to struggle under the burden of debt.

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