By Kevin Howard
There is an old joke about a boy whose teacher assigns him the task of explaining the difference between theory and reality. I have faced this dilemma many times in the self- storage business, and often found theory and reality don't match.
When I started in this business in 1977, the theory supported at the time was that the prime users of storage were apartment dwellers. The theory seemed to make sense. Apartments were being built on a smaller scale with no storage or garages, while people were becoming more materialistic and needed a place to store their surplus items. For years, I would look for locations near apartments and gear advertising toward their residents.
In 1984, I put the apartment theory to the test. At the time, I was managing 53 self-storage properties in Washington and Oregon. A survey of more than 13,000 tenants revealed 52 percent of our renters were homeowners. This amazed me. I began making test calls and soon discovered the storage "fact" I had been quoting since 1977 was, in reality, a fiction.
Renters said that although they owned homes with a garage, they more utilized the space to store things with sentimental value, such as grandma's rocking chair, an old dresser or a dining-room table. Garages were also filled with things of practical value, such as seasonal items and sports equipment. The prime motivator for securing storage was the woman of the house, while the husband signed the lease and did the moving. Annual surveys since 1986 reveal homeowners continue to be our primary customers.
In the mid- to late-1980s, I was faced with another theory vs. reality in the self-storage business. After hearing and repeating the fact, "We have a five- to seven-mile marketing radius around our storage facility," I regarded it as true. In 1988, when I used several facilities for a random sampling, I discovered it to be another falsehood. We took five sample facilities, plotted all their existing tenants on a census map, then drew a radius out from each. In an urban to suburban area, the majority of the tenants came from within a one-mile radius, the remainder from within three miles.
Of course, the marketing radius continues to shrink as I survey this factor on an annual basis with my 46 facilities. As populations become more dense and self-storage facilities become more prolific, our ability to market to a wide area is limited. Recent surveys show about 50 percent of our tenants come from within a one-mile radius, and 80 percent come from within a three-mile radius. Again, few renters come from beyond that three miles.
|City Population||Number of Facilities||Square Feet of Self-Storage||Square Feet/
Square Feet Per Person
In the 1990s, I discovered another theory/reality discrepancy. Back in those days, I used the phrase "square feet per person that the market can support" so many times I began to question its validity. In the early '90s, we talked about particular markets being able to support 2 to 4 square feet per person. Later, we talked about 4 to 6 square feet per person that a market could support.
That the square footage per person was necessarily increasing seemed like a good theory, and it seemed that number in each market should continue to grow--for a number of reasons. Self-storage had become an accepted use. We had more second-time users, and there was greater demand as we became ever more advanced in our ability to produce and procure possessions. But on what evidence was I basing my facts? I decided to once again survey my Oregon facilities.
The chart generated from my survey detailed each city and its population, total number of facilities, total square feet of storage and proverbial square footage per person. The facts were interesting. Only three of the 15 Oregon cities I surveyed had a square-foot-per-person ratio of less than 6:1. This would seem to indicate that markets could support a much higher ratio. Upon closer inspection, however, one can see that 4 to 6 square feet per person is probably all a market can support, since the balance of the cities surveyed were experiencing 80 percent or lower occupancy.
This community-information survey was conducted using my 24 years of records, printouts from tax rolls and title reports, and phone calls to owners. Of course, the population will continually need to be updated, as will the number of facilities and square footage as more self-storage facilities are built. Recently, I was provided a list of 42 new facilities in the planning stages in the 15 communities I surveyed. The study did point out some accuracies in the extreme. For example, Bend and Beavertown, Ore., have the highest square feet per person, and tend to have the lowest occupancies and the most give-away marketing in the state. In this case, reality did support theory.
These days, many owners are concerned with overbuilding. I also wonder how much square feet the market can support. Is everyone in the American market already aware of self-storage? Are we only dealing now with the potential for repeat business? Or is the market still expanding? Do young homeowners have an increased demand for storage? Do the baby boomers, with their second homes and additional toys, have an increased demand for storage?
Of course, these questions and concerns exist only in the realm of theory at the moment. I will continue to survey my existing tenants to determine the difference between facts and fictions. (And incidentally, if anyone would like to know the punchline of that old joke, feel free to give me a call.)
Kevin Howard is the owner of Kevin Howard Real Estate in Portland, Ore., which specializes in the brokerage, sales and management of self-storage facilities. For more information, call 503.255.5621; e-mail [email protected].