By Pete Frayser 

While small owner-operators still rule the self-storage industry in the United States, there’s no denying the continued growth of the larger players—who hold more than 75 percent of the market share—makes things difficult for newcomers to the business. With increased access to capital, the best know-how in the industry and portfolios large enough to allow them to absorb losses, the big guys are able to adopt aggressive pricing strategies that make them more competitive.

However, if you’d like to travel to a place where the industry is just beginning, to a time when pioneers are taking risks on a new concept with little public awareness but unlimited potential, look no further than Latin America.  

Obstacles and Upside

While the U.S. self-storage industry has been around since the 1950s, the sector is still relatively new to our southern neighbors. This great opportunity for growth carries obstacles and advantages.

In Latin America, owners aren’t only tasked with educating consumers from the ground up, they’re faced with rapidly rising real estate prices, limited access to capital and, in many cases, unstable currencies that make forecasting and managing a budget nearly impossible. To boot, local legislators are often unfamiliar with the product, which makes it all the more difficult to obtain the proper permits and licenses required to build and operate a facility.

Regardless, the upside remains tremendous. To understand the potential of this region, you must look at the trends of the modern-day Latin American consumer. Over the past decade, the middle class has grown by more than 50 percent, a figure that can only be matched worldwide by China and parts of Eastern Europe. This budding class often has some connection with the U.S. and is, therefore, quick to adopt American concepts.

They’re also tech-savvy, with more than 155 million smartphones in the region, a figure that’s expected to grow to 245 million by 2019. This makes the areas consumers extremely easy to identify and connect with from a marketing perspective, which is becoming increasingly more important to self-storage owners. Finally, Latin Americans are becoming more urban. Their cities are growing vertically, which creates a large demand for one thing: more space!  

Being a Pioneer

With these prospects for growth, you’d think the U.S.-based real estate investment trusts and private-equity firms would be chomping at the bit to get involved. They could diversify their portfolios with a bet on an emerging market as they’ve seen their counterparts do in many other industries, such as banking or commodities. However, this isn’t the case. The uneasiness that accompanies risk and general uncertainty has kept many of the major players out and created ample space for home-grown pioneers to take the reins and own the market.

While we’re seeing several local developers add storage to their multi-use complexes, the majority of facilities being built in Latin America are family-owned and -operated. Often backed by a combination of private wealth and modest bank loans, these new arrivals have taken note of what the industry has become in the U.S., and they’re ready to jump at the chance to replicate this in their home countries.

While investing in unchartered territories can lead to failure, these contemporary “mamá y papa” operators have an advantage. They’ve learned from the mistakes of others who came before them and can point to the U.S. as a case study to illustrate this industry’s potential. With the right combination of business acumen, a knowledge of their local market, access to sufficient resources and a little bit of luck, there’s no doubt these new owners will be able to find success and mark their territory.

The question now is, what’s the end game? Will they look for foreign investors to provide backing for aggressive growth that’ll allow them to put a strangle hold on their market? Will they aim to build an attractive enough set of assets to sell and ride off into the sunset? Or will they dedicate their lives to an industry that has provided hundreds of thousands of jobs and generated billions in revenue in the U.S.?

The answers to these questions won’t be known until this new market matures and we see its fate play out. In the meantime, the one conclusion we can draw is that in Latin America, the little guys have a chance.  

Pete Frayser is the business development manager for Latin America for Janus International Group LLC, a manufacturer of self-storage roll-up doors and building components. Headquartered in Temple, Ga., the company has eight U.S. locations as well as manufacturing facilities in Mexico and the United Kingdom. For more information, call 770.562.2850; visit www.janusintl.com.