Extraordinary Times – How Long Will They Last?
During the relatively brief history of the self-storage business (35 to 40 years) the perception about the industry has changed dramatically. Wall Street has now embraced the industry and life insurance companies and conduit lenders have come back to the market, enamored once again with lending on self storage properties with terms similar to core asset classes such as office, retail and industrial. Along with the respect that the self-storage industry has earned over the years comes an increase in competition. Operators are now realizing that sophisticated operations and economies of scale are imperative to survival in the business. This is more apparent today than ever before as we are seeing large operators winning business away from smaller operators whether by pricing, advertising or property amenities. I would also note that in general, the large operators are able to get a rent premium over the small operators that have similar properties in the same market. This leads me to believe that the self-storage industry has reached a crossroads and operators need to make the necessary adjustments in order to compete as the industry continues to mature.