By Liz Wolf
Reprinted with permission from "The Storage Facilitator" blog.
While it may seem like the well-capitalized self-storage real estate investment trusts (REITs) have all the advantages—including huge marketing budgets, beefed-up staff and deeper market penetration—smaller, independent operators are finding ways to compete with and even outperform these powerhouses. Strategies include everything from mimicking these companies and borrowing their ideas to using targeted local marketing and outdoing them with better customer service.
“These REITS are billion-dollar companies, but in the whole scheme of self-storage, they’re small,” says Mike Moyer, president and co-owner of Budget Store and Lock Self Storage in Pennsylvania. “We’re in the low to mid-90 percent occupied at all times companywide, so we’re doing something right.”
Mirroring Goliath’s Success
Moyer’s company owns 18 facilities in Pennsylvania’s Lehigh Valley. His biggest competitors are Public Storage Inc. and U-Haul, but he welcomes them.
“The REITs are the Goliath, the 800-pound gorilla, but they do a lot of things right because they have the resources,” he says. “My whole thing is just mimic them on a smaller scale. If they’re selling tenant insurance, why don’t we? If they’re getting a $22 admin fee, why aren’t we? It’s just seeing what they’re doing, and taking the things you think are working and running with them.”
Moyer attends national self-storage conventions and listens to REIT executives speak. Since they are publically traded, the REITs share useful information. For example, Moyer says a REIT might push up rates at a facility in Indiana to see how much more it can charge during the summer. If it can successfully pushes up rates there, it can roll out the increase to more stores. If that works, it can take the rate hike companywide. “We don’t have that luxury, but we can watch what they do,” Moyer says.
Public Storage and U-Haul are the price leaders in Moyer’s market, and that’s fine with him. “We’ll gladly be a solid second place because my managers can say, ‘Look, you can get a 10-by-10 with us for $102, or you can go to Public and pay $130.’ We can show customer value.”
However, some operators have advised him to raise rates. “They say, ‘If they’re at $130, you should be at $128,’ but we’d rather do a slow burn and work up to that over time,” Moyer says. “You can argue all day whether we should go up and be right behind them. Maybe we’re leaving money on the table, but it’s been our philosophy for 17 years, and it’s working for us.”
Local Presence Is an Advantage
Local marketing is key in landing tenants, Moyer says. He recommends remaining visible among local media outlets, creating good pages for social media, and posting content that resonates with local consumers. While Moyer can’t compete with the REITs’ huge marketing budgets, he can have a presence by targeting a neighborhood around a facility by getting involved in the chamber of commerce or supporting local sports teams or schools.
“We’re involved in a ton of local community events, whether it’s sponsoring a golf tournament or a little league team,” Moyer says. “I think if we’re out there and people see us, they think of Budget Store when they need storage.”
Like many independent operators, Moyer uses online lead aggregators and maintains a strong website. “There’s nothing we haven’t tried, and at the end of the day, you just have to have a big website presence,” he says. “We’re No. 1 organically in our market.”
Is Technology the Equalizer?
Various software programs help level the playing field with the REITs, says Phil Murphy, president of Next Door Self Storage, which operates 14 facilities in Illinois. “However, you have to find the management software that’s really going to home in on what you’re missing—whether it’s working your collections or leads,” he says. “You can’t do it all, and no one software company seems to be able to do it all.”
For Murphy, lead conversion is one way he competes. “When leads come in, often they’re not worked,” he says. “Now, we take a multi-step approach, so we’re following up on every lead, whether it’s e-mails, texts or phone calls. We’re using a storage-management software that handles that for us.”
The company has also revamped its website. “The faster and more consistently you engage potential customers, the more likely you’re going to get them to come in,” Murphy says.
Are REITs Actually Beneficial?
Next Door Self Storage is growing, despite stiff competition. It’s building a three-story, climate-controlled facility in Algonquin, Ill., with plans for another facility in Crystal Lake, Ill. Across the portfolio, occupancy rates range from 84 percent to 96 percent.
“We have all major REITs in our market,” Murphy says. “The Chicago market is pretty crowded. But to be honest, sometimes REITs can be beneficial. In those markets where the REITS are, it’s a lot harder to get attention and get to the top, but when you get there, there’s a lot more revenue management and standardized practices. You see a more common approach to storage in those markets than if you go out into markets that REITs aren’t in.”
Murphy says the REITs will push up rates because they’re motivated by Wall Street and must show investment returns. “They’re not going to sit there and leave a flat rent,” he says. “Those are the practices that everybody should be doing, but not everybody has the technology or market forces to do it.”
While Port Orange, Fla.-based All Aboard Storage competes with powerhouses like Public Storage, director of operations Amy Holley says her company wields some advantages over the REITs. “We can operate a little faster with problem-solving than they can,” she says. “Where they have to go through their corporate levels to do certain things, sometimes even customer complaints, we solve everything on the ground.”
The company operates 13 facilities in the Daytona Beach, Fla., area and has a 48,000-square-foot facility under development. The chain’s portfolio is about 82 percent leased.
“Our customer service sets us apart because we empower our managers to treat their facilities like they’re their own,” Holley says. “If we have that unhappy tenant, instead of checking with corporate to see what we can do, it’s ‘Let me see what I can do,’ and if that’s not enough, then we’ll go to corporate. It’s about empowerment.”
Liz Wolf is a Twin Cities-based freelance writer with 30 years of business reporting and writing experience. She’s currently a contributor to “The Storage Facilitator,” a self-storage blog managed by SpareFoot and hosted by partners SelfStorage.com.