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3 Emerging Service Sectors With Potential as Self-Storage Add-On Profit Centers

As self-storage markets become crowded and many operators try to leverage similar add-on services to bolster revenue, finding ways to differentiate yourself from competitors is a real challenge. Here are three emerging service niches that have ancillary-income potential for your business.

Steven Jeffers

January 26, 2023

6 Min Read
3 Emerging Service Sectors With Potential as Self-Storage Add-On Profit Centers

The self-storage industry has surged in popularity in recent years, and for new investors as well as experienced operators, it’s becoming increasingly difficult to rise above the competition. Most established facilities aim to expand their revenue beyond unit rentals via add-on profit centers like truck rentals, boat/RV storage, retail sales, tenant insurance and other offerings. But as these products and services become commonplace, it’s more difficult to differentiate one operation from another.

Dr. Seuss is attributed with saying, “Why fit in when you were born to stand out?” Self-storage operators may be asking themselves that very question. Fortunately, there are a few emerging sectors that mesh quite well with the industry service model and have the potential to draw new customers. Let’s examine three alternative profit-center ideas that may help you stand out from the crowd and improve your revenue stream.

Cold Storage

Cold storage is typically used for items with a short shelf life such as fruits and vegetables, plants, cosmetics, and medical supplies. It’s different from climate-controlled or even wine storage because the required temperatures are much more akin to those of a refrigerator or freezer, generally ranging from -22 to 46 degrees, according to Southwest Solutions Group, which specializes in high-density shelving and other storage systems.

Interest in food-delivery services, food trucks, mobile restaurants and ghost kitchens have spiked since the onset of COVID-19, increasing the cold-storage market. Consider that 60% of U.S. consumers order delivery or takeout at least once per week, according to Upserve, a company that specializes in restaurant-management software.

Another customer base that needs more cold storage is the pharmaceutical industry. As we’ve seen in the last few years, the need to rapidly store vaccines and other medicines means local pharmacies and medical offices need a way to stock their local supply.

Ultimately, this storage type could serve as a viable income source for self-storage operators.

“We think there might be an opportunity to provide mini-cold and -freezer storage to private businesses and the general public,” says Roy Carroll, owner of The Carroll Cos., a Greensboro, North Carolina-based developer of multi-family properties, mixed-use lifestyle centers and self-storage. “Food safety and supply is a growing issue that has businesses and the public stocking up on perishables to ensure that supply is available when needed. This could be a restaurant that has had a hard time maintaining food stock, or an individual that doesn’t have the space or desire to purchase a freezer.”

One potential drawback is cold storage is costly to build and maintain, as it requires a certain level of insulation and refrigeration. This increases the need for regular maintenance and oversight since units can malfunction and stored contents must be kept within specific temperature and humidity ranges. Still, cold-storage can be a profitable investment for self-storage operators in areas where pharmacies and food-delivery services are plentiful.

Luxury-Vehicle Storage

We’ve also seen impressive growth in a swanky, new storage type: luxury vehicles. This isn’t your father’s car storage. Facilities that specialize in luxury cars typically offer clubhouses for members, units with lofts that are suitable for gatherings, and lifts to work on vehicles. This is a niche that’s likely to continue expanding. The global market has expected growth of 5.2% through 2027, according to a July 2022 “Luxury Car Market Report” published by Research and Markets. Despite inflation, “rising disposable incomes of individuals are shifting consumer preferences towards luxury car brands,” the report reveals.

This niche is suited for self-storage operators whose properties are considered luxury real estate. In fact, it can be a value-add that completes a high-end investment portfolio. Those who already work in this space have a quicker, easier path since they’re already familiar with the clientele who’d have interest in these units and amenities.

The most cost-effective means to develop luxury-car storage is to build the units or convert a warehouse facility, then aid tenants in upfitting and customizing the space to their specifications. This is different than traditional vehicle storage in that it caters to longer-term rentals with the capacity to modify space.

Industrial Outdoor Storage

Another alternative asset class that’s having a post-pandemic surge is industrial outdoor storage (IOS). It’s generally a niche industry that caters to a range of businesses from logistics to e-commerce, providing space for fleet vehicles, heavy equipment, shipping containers and other materials. It’s seen a spike in popularity over the last several years due to the rise of online shopping, with part of its attraction being that it’s viewed as a supply-chain solution.

Though IOS facilities have historically been owned by “mom-and-pop” companies, investment groups and real estate investment trusts (REITs) have begun to acquire these properties, according to “Commercial Property Executive,” a news outlet dedicated to the commercial real estate sector. Since they’re predominantly outdoor-storage yards, they have little overhead and are easy to maintain. Increased demand has resulted in a big jump in rental rates, with Prologis Inc., a REIT that specializes in logistics facilities, expecting rent to jump as much as 22% in 2022.

Low overhead and increasing rent makes IOS an attractive investment. Self-storage operators who have vacant land or space should investigate it as a potential alternative to RV storage or traditional self-storage expansion projects.

Exploring Viability

All three of these emerging business sectors—cold storage, luxury-car storage and IOS—are experiencing increased demand and could be an enticing value-add to a self-storage portfolio. That said, they are hyper-niche asset classes, which means a detailed feasibility study should be conducted before committing land and financial resources.

These are also business uses in which zoning and permitting could prove challenging. Municipalities can be difficult, and neighboring residents and businesses may not be pleased about having food trucks or Amazon containers stored next door.

To be successful, these services require a lot of marketing and selling on the front-end, however, any marketing and advertising strategies must be specific to the audience. In addition to targeted, digital campaigns, you’ll want to develop working relationships with complementary businesses, for example, restaurants, food-delivery services, food-truck organizations, car dealerships and others that are supported by the desired clientele.

All three of these sectors offer opportunity and upside. If you’re a self-storage owner who wants to stand out within an increasingly crowded industry, these asset classes can do that. They’ll likely be a good source for new revenue, favorable returns and value to future investors. As entrepreneur Seth Godin has said, “In a busy marketplace, not standing out is the same as being invisible.”

Steven Jeffers is the West regional manager for Spartan Investment Group, which operates the FreeUp Storage brand. With 10 years in the industry, his experience and knowledge include operations, marketing and leadership development. To reach him, email [email protected].  

About the Author(s)

Steven Jeffers

Facilities and Operations Manager, Bee Safe Storage and Wine Cellar

Steven Jeffers is the facilities and operations manager for Bee Safe Storage and Wine Cellar, which operates 21 self-storage facilities in the Carolinas, Tennessee and Texas. His experience and knowledge includes local marketing, management optimization and leadership training. For more information, e-mail [email protected]; visit www.beesafe.com.

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