Category Archives: Consumer Behavior

Why We Love Self-Storage More Then McDonald’s

 Issue 79 – Storage is better than Big-Macs

Introduction…Turns out the only thing Americans may love more than Big Macs is hoarding.

There are more self-storage facilities in America than there are McDonald’s restaurants, according to a recent report from the commercial real estate publication REJournals. The U.S. has more than 4 times the number of self-storage facilities than McDonald’s. There are 58,000 self-storage facilities in America compared to only 14,146 McDonald’s restaurants at the end of 2016.

Finding a place for extra scrapbooks, holiday decorations, office records, boats and RVs isn’t exactly cheap either. The average American household is using about 18 square feet of storage at an average rental rate of $1.42 per square foot per month.

The industry makes more than $24 billion in revenue annually. Plus, state and property taxes get to scoop up about $3.25 billion.

Here are 4 reasons Why We Love Self-Storage More Than McDonald’s:

  1. We are a hyper-consumer nation consuming more than $14 billion in goods and services, much of which ends up in storage

  2. The psychology of self-storage is we have month to month leases with no end date so the renter thinks he will move out next month that never comes

  3. We are a nation on the move with 12% of the population moving each year

  4. When the economy is improving, we buy more stuff – when the economy is downsizing we store more stuff

Conclusion: So why are we building more storage facilities?  The population and the economy are growing.  But, more importantly, the trade area for storage is only 3-mile circle.  Take 18 square foot per household in an area and you can see the demand is great and growing.  And we have more room to grow as only 10% of the American households have discovered the joy of self-storage.

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How To Make Money Off Our Junk

 Issue 74 – Safestore UK

Introduction…Investors in London’s premium real estate know their tenants are among the world’s wealthiest and most stable.  Schroder Plc has $3 billion worth of property with these most stable tenants.

But, in the era of Brexit, the market can change.  That’s one reason Schroder is the largest self-storage company in UK with 109 stores in 45 cities.

Demographic logic…What storage lacks in cachet, it makes up in demographic logic. Downsizing retirees and growing ranks of home renters in London are creating what Schroders and other real estate investors see as a Brexit-proof and recession-proof opportunity.

In the U.S., growth has been pretty amazing.  Today there are 54,000 self-storage facilities in the United States, which is 90% of the global storage industry.  Those sites hold 2.63 billion square feet.

Storage beats Hollywood…All that space is sold in small increments generating $32.7 billion in revenues.  Last year that was three times Hollywood’s box office gross.  In most cases, self-storage is far more profitable than other conventional real estate. As an example, in 2016 self-storage rented for 97 cents per square foot in Phoenix which was similar to the average one-bedroom apartment.  In larger cities, storage can rent for two to three times higher rates.

Growth factors…Americans are relentlesss at accumulating consumer goods.  From 1967 to 2017, expenditures for durable goods – like furniture, bikes, electronics, clothes, books – increased almost 20 times.  As a result, Americans have run out of room for their stuff.

The industry also thrives on disruption to our lives.  It serves as a temporary resting place for stuff of the dead, divorced, downsizes, and dislocated.

In conclusion..These trends are driving investments in a sector that most real-estate investors barely notice.  And in uncertain times, self-storage looks like a place to stash money.

The near term opportunities in self-storage are exciting.  Be sure to stay tuned.  If you are not a subscriber to this newsletter, do so in the upper right of this page or go to self-storageinsider.com for your FREE subscription.

Self-Storage Boom Driven By ‘Four Ds’

Issue 70- Self-Storage Demand Driven By Four Ds

Introduction...Self-Storage is booming.  Seventy-five per cent of all self-storage in the world is in the United States.  There are over 50,000 storage facilities in the U.S. and the rest of the world has 15,000.

Demand…Demand for self-storage is driven by four major life events the industry calls “the four Ds”

  1. divorce
  2. death
  3. downsizing
  4. dislocation (e.g. job loss)

“The big driver is change,” said Brad Schwer of Morningstar Equity Research.  “In one way or another, people are looking for stability.”  That may be why they hang onto stuff that may not have a future value to them.

The U.S. has an estimated 2.6 billion square feet of storage, according to the Self-Storage Association.  That’s about 8.1 square feet per person, which is growing.

Experts are not sure how much longer this growth curve will last.  However, storage is very local.  Typically, our trade area is a 3-mile diameter.  So, one area that could be over built, may not impact another area where demand exceeds supply.

Click here to watch the rest of the video.

I recently visited a property in a town west of Fort Worth. This C Class property was charging higher rents than an A Class property one mile away.

I asked the owner how she could charge higher rents than a nicer A Class property.  She said, “I don’t worry about what my competition charges.  I just give the best personal service in town, so price is secondary.”

Why tenants stay...Most people rent storage much longer than they expect and over value the sentimental item inside.  Rarely do they shop for better pricing once their belongings have been stored.

The physiology of storage is opposite that of other commercial real estate.  Generally, we want longer term leases for commercial property of 3 to 5 years.  With storage, our leases are generally, month to month.  If they had a term lease, they would be inclined to move out at the end of the term.  With a month to month lease, they can move out at the end of the next month.  Then the next month.  Then the next month.  Five years later, they still haven’t moved.

In conclusion…Self-storage is a good business to be in.  The reason its a good business is that you can raise rents on existing customers by 5 to 10 per cent every eight to ten months and they will stay.  Most customers are on auto payment so the small incremental increases typically don’t spark a move out.

7 Top Benefits Of Storage Property Investing

Storage Investing Issue No. 61

Introduction…  Let’s first look at the benefits for customers using our storage properties before we discuss the benefits of investing.  Without a strong and growing customer base, it would not make sense to get involved as investors.

7 Customer Benefits of Using Storage Units

  1. Self-storage units are safe as well as a cost-effective solution to having extra stuff
  2. Self-storage units are a cheaper solution than building onto the garage
  3. Self-storage units are great for those who don’t have a permanent address like full-time RVers or full-time cruise ship travelers
  4. Self-storage units are a great place to store items that the kids at college no longer need, but might later when they start a household
  5. Self-storage units are beneficial to those who started working from home and need extra space
  6. Self-storage units are used by those who have inherited personal property and need time and a place to sort through the items
  7. Self-storage units provide a place for small businesses to store extra inventory, equipment, or files

The last item I know from personal experience.  When I first started working for a downtown Fort Worth Certified Public Accounting firm, somehow I got the job of periodically going the the storage unit to purge old files.  So, storing old but not yet past the statute of limitations are prime candidates for self-storage.

Conclusion… We will discuss “7 Top Benefits of Storage Property Investing” next issue now that we have detailed the customers 7 Top Benefits of Using Storage Units

Why We Love Self-Storage More Then McDonald’s

Introduction…Turns out the only thing Americans may love more than Big Macs is hoarding.

There are more self-storage facilities in America than there are McDonald’s restaurants, according to a recent report from the commercial real estate publication REJournals. The U.S. has more than 4 times the number of self-storage facilities than McDonald’s. There are 58,000 self-storage facilities in America compared to only 14,146 McDonald’s restaurants at the end of 2016.

Finding a place for extra scrapbooks, holiday decorations, office records, boats and RVs isn’t exactly cheap either. The average American household is using about 18 square feet of storage at an average rental rate of $1.42 per square foot per month.

The industry makes more than $24 billion in revenue annually. Plus, state and property taxes get to scoop up about $3.25 billion.

Here’s 4 reasons Why We Love Self-Storage More Than McDonald’s:

  1. We are a hyper consumer nation consuming more than $14 billion in goods and services, much of which ends up in storage

  2. The psychology of self-storage is we have month to month leases with no end date so the renter thinks he will move out next month that never comes

  3. We are a nation on the move with 12% of the population moving each year

  4. When the economy is improving, we buy more stuff – when the economy is downsizing we store more stuff

Conclusion: So why are we building more storage facilities?  The population and the economy is growing.  But, more importantly, the trade area for storage is only 3-mile circle.  Take 18 square foot per household in an area and you can see the demand is great and growing.  And we have more room to grow as only 10% of the American households have discovered the joy of self-storage.

For more self-storage investor news, subcribe above.

The 6 Secrets To Getting People To Say Yes

the-secrets-to-getting-people-to-say-yes “Influence” by Robert Cialdini, A Short Review Bill Moist, MS, CPA

  1. Reciprocity Give them something first, i.e. giving a free taste of candy when going into a candy store and customers were 42% more likely to buy because they felt obligated to give back to someone who had given to them.
  2. Liking Find a commonalty with those we are negotiating with. We get a better deal and more grace here.   We do more business with people we like.
  3. Authority  We say yes to people who have more authority who can give us evidence that they are competent, credential, and experience in a particular area.
  4. Social Proof If we find a lot of our peers are doing something or this is the largest selling item we are more likely to buy. A restaurant owner can increase the likelihood of buying a certain item by adding – this is one of our most popular items.  It increases sales by 13 to 20%.  Why not say most popular options.
  5. Scarcity We want items that are more rare. Grocery store can increase sales by saying “only x number of items available per family.”
  6. Commitment and consistency. We want to be consistent with what we already said or have done publicly. Ask people to take a small step in our direction.  Then they are more likely to follow through.  In health care no shows are a big problem.  Instead of giving patient a card with date and time, give them a blank card and have them write it in.  No shows drop 18% because they’ve made an active public commitment to that time and date.

It has been a pleasure to share The 6 Secrets To Getting People To Say Yes.  A link to this book, Influence,  is provided later.  This is Bill Moist, MS, CPA

Announcing Better Marketing Tools That Makes Self-Storage Easy To Manage

Stress Free Zone

Introduction…Last week I was reviewing the possible purchase of a self-storage property just west of I-35 south of Dallas.  I was quickly able to see that the revenue reported was correct because the owner was using the number 1 marketing/management self-storage software tool. The rents were properly reported because it tied back to the occupancy report.

This means the rent collected was reflected as paid for each individual unit.  It made it very easy for the owner to verify that all the rents were properly deposited in the company bank account. The report showed how much was collected in check, credit card and cash.

This is a great example of what we can do today with the best marketing/management tools.  Here are a few of the benefits to owners or investors:

  • Internet Listing Services to connect with more potential renters
  • Call centers to answer prospects calls and make it easier to rent from you
  • Online rentals to make it easier for potential renters to rent and give you money
  • Online account management to make it easier for tenants to give you money
  • Online credit card, ACH, and Bank Draft processing to make it easier for tenants to give you money
  • Tenant Insurance to make it easier for tenants to insure their storage and give you more money
  • Revenue analytics to make it easy to manage and market the property increasing revenue to you

It seems to me that every business should make it as easy as possible for customers to give you money.  Oh yes, we do have the property office managed live for those who want to see and talk in person.

In conclusion…Relatively inexpensive marketing/management tools have now made self-storage ownership as close to passive income as available in real estate today.  Join me in this great venture to passive income.

Consumer Behavior And Technology

TSSALogo

The Dallas Chapter of Texas Self Storage Association panel discussion revealed startling studies of consumer behavior as it reacted to technology.  This consumer behavior information applies a many industries as the results were found in a cross section  locations and socio-economic status.

Sit back and enjoy what was gleaned from hundreds of locations and thousands of customers:

  • 2% of leasing comes from social media
  •  Kiosk going away
  •  Hand held device phone more prevalent
  • Location important
  • Online increasing
  •  Tenants like different venues
  • Make it easy to people to do business with you.
  • 59% have desk top
  • 72% laptop
  • 85% have mobile experience
  • 70% of renters are woman
  • 50% of renters are first time. Good help makes a difference
  • 3 stores under 40,000 sf cut hours to 8-12 part-time employees
  • 80 stores only part-time
  • Some technology reduces costs.
  • 1st priority is local search, Yelp, Four Square
  • Website Must be SEO friendly. 70% top 2
  • ESign no paper files is used by only a few owners.
  • Internet marketing cost $7000 to $9000 store. 7 to 8%
  • SEO local website $400 per month with 8 stores
  • REIT has advantage with technologe
  • Advantage is market penetration so fill up
  • Smaller property owners can outperform on customer service, security, local involvement i.e. garage sale to raise money for local charity
  • On line rentals are game changer
  • Store phone is a cell phone. Take on Property
  • Always answer the phone with phone service
  • QR codes off
  • Google plus off
  • Storage battles TV increase sales amount as does online auctions…
  • The actual sale happens at store to comply. Blair has had 600 sales.
  • Mail people pictures of content to get back rent.

In summary…No doubt, consumer behavior is changing as we adopt new technologies and forgo old technologies.  A successful marketing follows and adopts to these trends.