Other articles by Stan

by Stan Colona

My most enjoyable lessons in business school involved discussion and analysis of 'case studies.' Case studies are stories typically written about an actual company and a business challenge the company faced. The narrative usually included background information about the company/players, a description of the challenging issue, and the impact of potential solutions. The reader was not given the actual outcome or actions taken by the subject company until he/she had formed an opinion and made a recommendation for the solution.

The purpose of the exercise was thinking about alternatives and outcomes. Often, there were multiple answers or strategies that would be successful. In fact, the actual company names were usually withheld from the study.

There are over 30,000 self-storage facilities in the United States. Therefore, 'case studies' involving specific properties, operators, and characters are abundant. The intention of sharing these 'day in the life of self-storage' stories is to stimulate thinking about challenges, solutions, and results in our industry.

Case Study #10002
The Facts

The Sister Road property is located in a major Midwestern market. The population of the market is approximately 4.3 million people. The market has approximately 600 storage sites with over 26 million rentable square feet. There were nine competitors within a five-mile radius (trade area) of this site during the period of analysis. That is more than the national average and this city is currently known as one of the most saturated self-storage markets. Therefore, saturation in the trade area was, and continues to be an issue.

The operator of this property has another self-storage facility within two miles of this site. The demographics are good in the area. Many businesses and residences exist within the trade area and the economic atmosphere was strong during the period of study.
The access and visibility of the site are irrelevant to this case study. The property is a mature facility that had been open for several years prior to the time of analysis.

The layout of the facility is 'first generation' style self-storage. Long buildings exist in parallel rows separated by drive isles. Both exterior drive-up units and interior hallway units exist. A variety of different sized units are available and the space mix appears to be consistent with other sites in the trade area. All of the units offered are non-climate controlled.

There is an apartment and a single resident manager named Betty Sue. Betty has previous self-storage experience, however, she has only been managing this location for the last four months. A District Manager that has thirteen other sites in the market and a new Regional Manager are supervising the site.
Office hours are typical and the site is open seven days per week. Tenants are given 24-hour access on a limited basis. The number of storage inquiries is brisk.

Marketing consists of a first month dollar move-in special that has been in existence for several months and the special is promoted with highly visible banners on property structures. The operator is running the promotion at all facilities nationwide regardless of occupancy. The Sister Road property was represented in a large Yellow Page advertisement depicting the sixty locations. The rates are comparable to competitors and the operator's other location in the trade area. Most of the competitors are offering a similar product at the same price as the Sister Road site.

At the time of analysis the site was not offering truck rentals. Other ancillary product sales from the retail showroom are equal to expectations and comparable with competitors.

The Opportunity

During a tour of this market the Regional Manager and Divisional Manager discovered a puzzling situation regarding the Sister Road site. The occupancy of smaller sized units (5x5's and 5x10's) was inconsistent with the overall occupancy of the facility.
The smaller units appeared to be what is typically considered a 'problem size.'

Problem sizes occur when the demand for that size does not exist in a unique trade area. (i.e., too many small units are offered in a trade area where the major demand comes from homeowners with large houses and large commercial customers). In this type of trade area, a space mix with too many small units will not meet the needs of the potential tenants. Units will typically be converted to larger sizes or discounted.

However, the facts did not support an issue of a 'problem size' unit. This site was a mature property and the demand in the trade area had always been consistent in the past. The space mix at the site had always been appropriate before.

The demand of a trade area can change, but there was no evidence to support it had. The competitors and the operator's other site were not experiencing issues in renting smaller sized units.

The Results

The Regional and Divisional Manager gathered all the information in this situation by touring the competitor sites, surveying their other nearby property, speaking to all of the managers, and mystery shopping the Sister Road site by phone. When they walked each site with managers, close attention was given to the smaller units. The focus of their discovery was oriented toward what was causing the Sister Road site to exhibit a demand different than the past, and different than the other nearby self-storage properties.
In the next few months the occupancy of the smaller units grew to expected levels.

What changes were made? What would you do?

Find out the actions that were taken by the Divisional Manager and his staff. In the interim, remember: 'smiling faces rent more spaces.'