Like it or not, as with any real estate class, there's no such thing as a sure thing in self-storage. Sure, you can lock in short-term guarantees on some things, but when you truly examine your storage business for the long haul, there's bound to be plenty of uncertainty. Whether it's new or more challenging competitive forces, shifting financial markets, fluctuating cap rates, undulating real estate values, unpredictable weather-related occurrences or changes in your facility operation, none of us has a foolproof crystal ball guiding us to a certain future.
With uncertainty being the only certainty in this business, how does an owner best position himself for the long run? On this fact-finding mission, we turned to some highly successful property owners and investors, asking for their views on how to achieve long-term success in the industry.
After analyzing their ideas and philosophies, we recognized a common thread among them: All of them focused on "staying power." Put simply, if you want to be in self-storage for the long haul and enjoy all the resulting benefits as a property owner, don't try to find your future in a crystal ball. Instead, focus on establishing resilience to sustain your business despite uncertainties. Here are our veterans' top 10 suggestions for achieving the staying power critical to long-term self-storage success.
It's no secret that location is the foundation of real estate staying power and a universal theme among owners. Good locations may cost you more in the short run, but they stand the test of time and offer better long-term protection for your investment.
A facility's building components can have huge long-term ramifications in the ability to retain tenants and compete for new ones. Further, the cost and time expended in repair and maintenance can affect staying power. Over time, complacency sets in with many owners; sure signs are failure to keep properties in top condition. Never overlook the importance of property aesthetics: Clean grounds, fresh paint and well-tended landscaping will keep the site sharp and competitive.
Packaging encompasses your entire business operation. A property's image needs to be consistent from signage to the rental office, business cards and manager uniforms. And don't forget about the power of websites and Internet marketing, where a growing majority of potential tenants now turn first to locate a storage facility. Package and present your facility as clean, safe, secure, friendly, professional and convenient. Remember: Perception is reality.
This one may surprise you. Networking is broad-based. It means understanding your customers and catering to their specific needs and requirements. It also requires knowing vendors and contractors, their services and products, so you can make better decisions for maintaining or expanding your property. Attend state, regional and national tradeshows; meet other operators; learn what works/doesn't work for others. It's a relatively small industry and most owners are willing to share advice. Networking also encompasses getting involved with community and charitable groups. Be a part of your community and you'll reap staying-power dividends.
We all have strengths and weaknesses. The best operators have partners or employees who complement their expertise. It could be in site selection, development, operations, marketing or finance. Staying power comes from the ability to recognize your limitations and tap resources to the fullest extent.
You can maximize staying power by creating an organization that combines management controls with flexibility. When a business is organized this way, you can, for example, create new opportunities to maximize rents and minimize expenses, or provide incentives to renters during downturns. Staying power is all about having the leadership to make major decisions and, at the same time, entrusting employees to be nimble and flexible with daily property decisions.
Create an atmosphere in which property managers and employees enjoy working with you. Their actions have major ramifications on operations and, ultimately, the value of your investment. Create a sense of pride and mutual benefit through incentive-based compensation programs and employment-growth opportunities. Promote respect in the workplace through your own actions and you'll cultivate a group of employees who understand the value of customer relationships and care for the facility as if it were their own, thus promoting staying power with tenants.
Change can be as subtle as technological advances in reporting software or security equipment, or it could be as pronounced as a new competitor building next door. It could also relate to non-operating factors such as the economy or capital markets. Whatever the case, self-storage operators who position themselves for the long haul are more proactive than reactive in their ability to change or modify their business plan based on micro- and macro-environmental developments.
Staying power is also predicated on the ability to withstand downturns in your cash flow. The only way to sustain your staying power from a financial standpoint is to have the ability to infuse cash when needed to ride out unexpected downturns or during leaseup periods.
We all know few investments provide the same return on investment as self-storage. Consequently, many owners grow overly attached to their properties. However, you may experience lifecycles in which your investment priorities change and market cycles result in higher property values and asking prices. A clear path to longevity and staying power in our industry requires the intuition to exit an investment and perhaps roll the gains into your next deal.
While every self-storage operator has his own reasons for success, this list is a compilation of common ones shared by some of the industry's most prosperous owners and investors. Those with whom we spoke have seen the industry evolve from a "build it and they will come" environment to a mature, highly competitive landscape. They've been through ups and downs, studied and networked to achieve operational excellence, and thoroughly understand the business at all levels. Through it all, they still have a tremendous passion for their work.
With this type of long-term vision, we can all toss aside those crystal balls and instead enjoy greater staying power in the self-storage industry.
Minh Tran is a senior partner at Storage Investment Advisors (SIA).
This article has been reprinted with permission from Inside Self-Storage, the premier magazine of self-storage professionals. For information, visit www.insideselfstorage.com.
The BSC Group has been voted Best of Business - Finance for five years running by the readers of Inside Self-Storage.