Stan Colona of XPS Services LCC Provides Services for the Self Storage Industry. [email protected]
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.'