Cooler temperatures have arrived in many parts of the country. Before we know it, we’ll be ushering out 2020 (many say, “Good riddance!”) and welcoming a new year.
What 2021 will bring the self-storage industry is anyone’s guess, as the country faces an election year in the midst of a global pandemic and economic recession.
Still, business must go on. Therefore, there are some new ideas in safety and technology that experts say must be implemented within the industry as well as keeping an eye on the operations.
Issues Affecting The Industry “When we look back at 2007 to 2008 during the first of the last recession, construction slowed the first three months,” says Raheem Amer, senior vice president of operation for Devon Self Storage in Emeryville, Calif.
Of course, history shows what happened then: Developers stopped developing, and when the industry proved recession resilient, there wasn’t enough supply in the coming years to meet the demand. In 2012 and 2013, developers began projects that took two to six years to develop.
“We saw a lot of this new development finally come to fruition. Looking back, we might think [it] will slow again. Some might think it will explode more. Some will think there is opportunity there, ‘Maybe I should jump in now,’” says Amer.
“I don’t think the recession will be as big as the last one,” says Eric Blum, president of BMSGRP Self Storage Consulting in Coral Springs, Fla., a company that researches markets and creates feasibility studies for developers. “I think it’s mostly just fear, and at the end of the day, the industry has to move forward. Things will change slightly, especially with markets and development, but most will continue as business as usual.”
This leads us into our first category of our 10 suggestions for 2021:
Development And Operations Six suggestions from industry professionals fall under the category of self-storage development and operations.
Keep a keen eye out for acquisition opportunities. Todd Amsdell, president of Amsdell Companies in Cleveland, Ohio, which has more than 90 properties, is looking to add more to its portfolio next year. “I still believe the industry is recession resilient and long-term viable,” says Amsdell. “We’re a family company that are long-term investors.”
Amsdell looks for periods of time to work with sellers to get into prime or new markets. “I think it’s still going to be hypercompetitive,” he says. “I don’t think it will be blood in the streets, but some of these properties may not be able to hit their investment return, and those owners might become sellers.”
This year was difficult for owners in many markets who were projecting as much as seven percent growth. According to Amsdell, the pandemic and ensuing free fall into recession changed all that. “Some operators in some markets are just happy to do what they did last year,” he says, cautioning that financing may be hard to attain. “Banks aren’t typically willing to lend in a recession. That makes getting financing extremely difficult, and it takes a different kind of investor to make deals work.”
Amsdell goes on to say that it’s a different kind of buyer’s market during a recession in that “most buyers want cash flow from day one, so for the buyer in it for the long term, I think there will be some opportunistic deals to be made.”
Look outside the box for development opportunities. Of course, no one has a crystal ball, but Blum sees the pandemic changing the way people live. “People are already not wanting to be on top of each other anymore,” says Blum. “As well, you have younger people moving outside of major metropolitan areas to afford housing and raising families.”
That makes developing just outside of major metropolitan areas more attractive. “Land cost will be less, but people will still be willing to pay major MSA rates while having a lower cost of living,” says Blum.
Another thing Blum believes will change the market is that more people will be working from home. “The pandemic proved some workers can be just as productive, or more so, working from home,” he says. “I would look for office buildings to convert to self-storage that might empty when companies offer more employees the opportunity to work from home.”
This will have a direct effect on the self-storage industry. “People will need to move more stuff into storage when they start working and teaching from home,” adds Blum.
There aren’t any major changes as to how feasibility studies will be drawn up, but it will become even more important to have one done, rather than rely on “intuition” or the only research that can be found online. “You really have to have boots on the ground assessing competition and other factors,” Blum says. “You can’t make a $10 million decision based just on what you find online.”
If you’re planning on building next year, Blum recommends doing it in phases, cautiously and slowly. “The economy is not well, and it is an election year; it will take time for the market to adjust to these factors,” he says. “I recommend phasing; if you’re building up, hold off on some floors for now. If you’re building multiple buildings, hold back.”
Take a look at the workforce. Mara Paredes, director of operations for The William Warren Group, doing business as StorQuest Self Storage, says her company will be investing in front line workers and assessing their staffing needs. She adds the only additional costs are in the states where the minimum wage is rising. “We’ll also be investing in training all our personnel and making sure they are trained properly,” says Paredes. “The budget for training typically increases five to 10 percent, but it might be more in the coming year.”
Most experts agree that the trait you’re seeking when hiring new staff is excellent customer service, rather than self-storage experience. This year, many are expanding that to place more importance on phone skills due to no-contact habits spurred by the pandemic. “We tend to hire people who do well on the phone,” says Amer. “In most cases, customers are just calling, and we really want to wow them over the phone.”
Amsdell agrees. “Your service level comes through via your people,” he says. “It’s never been so important to provide extra customer service over the phone.” Overall, Amsdell’s company will be focusing on finding more great people in 2021. “We always come back to the basics; it’s always about the people. Our great people will shine, and that will give us an opportunity to find more great people.”
Review legal documents. Though the Amsdell family of companies does this every year, it’s especially important to do it this year. “We take a look at our leases and make sure we’re county, city, and state compliant,” says Amsdell. “It becomes even more interesting in times like these with online and touchless leasing.” He suggests ensuring your website has the proper wording and disclaimers and your signage in your store follows all regulations.
Budget for flat rents and rising expenses. Steve Mirabito, president of StoragePRO Management, Inc., in Walnut Creek, Calif., believes rents will remain flat at least throughout next year. Additionally, properties throughout the country, especially in California, should brace themselves for higher property taxes.
Do not ignore capital expenditures. “Often, the first thing to be cut in a recession is capital expenditures,” says Mirabito. “Owners must think diligently about that approach. I think it’s essential to retain and attract new customers. If you put these expenditures off, the newer mouse trap will get the business.”
Safety Protocols In The Time Of COVID While many facilities have already implemented safety protocols, 2020 was such a chaotic year, with new information and mandates rolling out daily at times, that many facilities haven’t stopped to add the new protocols to employee handbooks or emergency plans.
“The people who are on top of it have planned,” says Charlie Fritts, president of Storage Investment Management, Inc. in Buffalo, N.Y. “Some smaller operators haven’t dealt with it, and it’s still very important, even if you just have one employee.”
Clearly, it’s important to know what the industry is doing to keep employees and customers safe. “Some smaller operators are only doing what they hear on the news and they are in the dark about how all of this relates to self-storage.”
Mirabito says that owners/operators should expect the pandemic to remain an overall theme for the industry–and society–for at least two years. “Even if they develop a vaccine, it will take time to test for accuracy and for it to get rolled out to the public,” he notes.
For the safety of your employees and customers, and to protect your investment, developing a safety plan is very important.
Develop a plan to implement company-wide and update handbooks. If you haven’t already, it’s imperative that you develop a plan and make sure employees are following the new safety protocols. Here are three of the most important ways your business needs to change:
• Implementing Safety And Cleaning Protocols: “Nothing happens at our office without a mask and an appointment,” says Andrew Kelly, Jr., principal at A B Kelly Realty LLC and Sierra Self Storage Consulting in Tucson, Ariz. “When someone comes in for an appointment, we do it through the window and there is very little opportunity for transmission. People seem happy about how seriously we’re taking safety.” In addition, signs are posted throughout the properties and sanitation on routinely touched surfaces is done and documented in a log. This would include counters, doorknobs, keypads, computers, elevator buttons, tablets, bathrooms, etc. If social distance cannot be maintained at the window, Plexiglas barriers can be installed. If that isn’t possible, having managers place boxes between the counter and the customer is recommended.
• Implement An Absentee Policy For Employees Specific To COVID-19: “In our case, we don’t ask every employee to get tested, but if they feel sick, we ask them to stay home,” says Fritts. “If they test positive, we sanitize our offices.” Additionally, if the office is small and there are two employees, SIMI has reduced hours to accommodate the one-person rule. Other companies have placed one manager outside and another inside, switching off at lunch or halfway through the day.
In reference to establishing leave for an employee for COVID-related absences, you need to ensure you know and follow your local, state, and federal guidelines with regards to leave and pay.
• Establish A Supply Chain For Safety Equipment: This includes masks, hand sanitizer, and cleaning supplies.
Technology And Communications
Update your websites. “You need an SEO platform and a modern website,” says Kelly. “I think if you still have a do-it-yourself website and don’t have a professional self-storage developer, it’s going to be a matter of staying in business or greatly suffering. This is a critical investment.”
Amer agrees. “Technology is shifting rapidly; it was already shifting the past two years, and COVID really accelerated everything,” he says. In addition to a professionally developed, modern website, you need to concentrate on how fast your website is responding to visitors. “Speed is a huge factor, especially to Google,” adds Amer. “If your loading speed doesn’t measure up, Google will give your site a lower ranking.”
If you haven’t converted already to completely online rentals and touchless interaction with your customers, you need to do so immediately. “We believe everyone is heading in that direction,” says Fritts. Two years ago, we gave tablets to all of our managers; now we do all of our leasing paperless and our customers sign on a tablet. We’ve implemented online leasing in some stores and hope to have that finished by the end of 2021.”
Paredes adds that the William Warren Group is investing in systems and ensuring all of theirs are cloud based.
Don’t forget gate access and security systems. The new focus on security is ensuring your customers are safe as possible during a pandemic, but customers still want to ensure their belongings are safe. Both of these goals can be accomplished at the gate. “We are upgrading our gate access and control systems, getting apps that recognize customers by their phones and will open the gate touchless for them,” says Fritts, who adds the cost is about $5,000 per property. “It isn’t cheap, but it’s replacing equipment that was even first generation. It is more reliable and secure.”
Upgrade your communications. Amer recommends a Voice Over Internet Phone system (VOIP), which can replace the old-school landlines. “When the pandemic started, we had to completely shut down some offices,” says Amer. “These systems integrate pieces of communications. When a manager went down, we could transfer the calls to another site or three different sites. When a customer calls, you want to be there.”
Other companies are hiring or expanding their call centers. “Our company is taking record breaking calls on payments, rentals, and general questions,” says Mirabito. “A majority of those are coming in through the call center.”
On a small budget? At the very least, ensure each manager has a cell phone with them. You can have office calls forwarded to them when they are not in the office.
Stay Cool And Collected One final piece of advice: “Remain calm,” says Paredes. “We don’t know what’s going to happen, but 2020 has been so challenging. I think 2021 will be so much better.”