By some estimates, the Canadian self-storage industry is 2,800 storage facilities strong and growing every day. Storage development reaches from St. Johns, Newfoundland, in the East to Victoria, British Columbia, in the West and Whitehorse in the Yukon to the north. With more facilities operating in multiple provinces, the time has come for Canada to have a national industry association of its own. No organization of a single territory can provide the services and data necessary to support current levels of expansion.
Until recently, most Canadian storage operators and those wishing to enter the industry had no resources for local data. They had to rely on research, publications and tradeshows produced by U.S. organizations, such as the Self Storage Association and Inside Self-Storage. While these entities have been tremendously helpful, the Canadian industry requires country-specific statistics and backing. Entering the storage business should be smooth sailing, not a shipwreck. But without relevant data, its impossible to plan for a successful business.
Enter the Canadian Self Storage Association (CSSA), navigated under the auspices of President John Madsen. The CSSA will support the Canadian self-storage industry, helping its members cope with continual change. The association is dedicated to business advancement through education and advocacy, and will keep members up-to-date with the legal and operational issues on the horizon.
Madsen has been part of the Canadian self-storage industry since 1978, involved with the development of approximately 20 facilities. He is supported by the following CSSA charter directors:
- Ken Hick is a commercial real estate broker with 30 years of experience in commercial revenue properties, including self-storage facilities.
- Sue Margeson has owned and operated her storage facility in Ontario since 1989. She has experimented with the marketing and sales of a variety of ancillary products for the industry, the results of which became a model for Chateau Products Inc.
- Joe Kormos has been active in the storage industry since 1976, when he joined the U.S. national association. Through his company, Canadian Storage Centers Inc., he has provided turnkey consulting services to the industry, from Halifax to Vancouver.
What You Need
Canadian self-storage developers need an industry profile for each province and major market area in the country. In addition to understanding trends in local economics and demographics, they need industry-specific information on market conditions, occupancy levels, rental rates, security, marketing, management and training. They also require access to a complete list of product and service suppliers, including those who provide property management, valuation and financing.
When considering expansion of a project or construction of a new facility, a storage owner has to make important business decisions regarding the viability of that action. He has to know whether the current market will support additional storage or if it is overbuilt. Without an organized body to gather statistics and analyze their significance, Canadian owners are left to rely on foreign data.
Access to Canadian statistics through a national association would be welcomed by appraisers and real estate professionals specializing in the valuation, sale and financing of self-storage, says Candace Watson, a Canadian appraiser specializing in self-storage valuation. In her career, she has relied on decades of information gathered by analyzing the industry in British Columbia.
But most appraisers and consultants attempting to estimate the feasibility of a Canadian storage project generally adapt U.S. statistics to the Canadian experience, Watson says. While there are many similarities between the U.S. and Canadian markets, there are significant differences as well. For example:
- Property taxes in Canada comprise a much higher portion of operating expenses than they do in the States.
- Military tenants comprise a significantly smaller proportion of the self-storage customer base in Canada.
- Self-storage per capita in Canada is less than half that of the United States.
In addition, U.S. occupancy dipped considerably in 2000, recovered slightly through 2001 and 2002, and remained stable or dropped in 2003. This trend was due to weak economic conditions combined with a significant increase in supply. By comparison, Vancouver Lower Mainland occupancies have continued to strengthen from 2001 to the present, primarily due to lack of supply in most submarkets and steady increases in rents.
Laying Down the Law
In addition to the pressing need for informational support in Canada, there are also several federal and provincial legislative issues that can detrimentally affect Canadian storage owners. Most can be effectively handled with the assistance of a national association.
First, there is the matter of whether to define self-storage as an active or a passive business. It can be both; however, if it is defined as active, the corporate tax rate will be about 22 percent. If it is defined as passive, the rate will be about 40 percent. The difference lies in the number of full-time staff members a business employs, and the small operator gets the short end of the stick. This formula was adopted before self-storage existed and intended to be applied to other types of businesses. The association can work toward making changes in the application of this standard.
In Ontario, new Reform Taxation Legislation was passed in 1998, which had the effect of increasing property taxes by as much as 45 percent. A capping procedure later limited the increase to 5 percent; however, at the same time, property assessment was changed to be based on market value. If the tax capping is lifted, storage facilities in Ontario will see a substantial tax increase. Without a professional association to assist them, it will be difficult to make their voices heard when it comes time to address the issue.
Lien provisions, which differ from one province to another, are another key concern. British Columbia operates under the Rent Distress Act. In Ontario, they use The Repairers and Storers Lien Act. In some territories, there is a complete lack of suitable lien provisions available to storage operators. It will be necessary to define appropriate legislation in these areas. The CSSA can help pave the way.
The CSSA invites self-storage owners and vendors to join its efforts. Members will benefit from the leadership, information, benefits and services offered. In this day and age, when a single change in legislation can have a devastating effect on a business, its not an option to sit idle. There are many critical issues facing the Canadian self-storage industry. To have any significant impact, there must be a national association to support. Who knows? It might even help keep the country united!
For more information and to receive a membership-application package, call 604.541.8538 or (toll-free) 888.898.8538.