Inside Self-Storage

SEP 2018

Inside Self-Storage (ISS) is an information source for industry owners, managers, developers and investors covering news, trends, facility operation, finance, real estate, construction, development, marketing, technology, insurance and legality.

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Page 35 of 63

M ulti-story self-storage isn't new. However, what used to be considered only by urban developers is now becoming standard in many markets. Going vertical is often the best way to match efficiency with market demand, no matter the size of the site. As recently as 15 years ago, it was commonly believed that some markets might not absorb multi-story self-storage projects. I recall hearing advice like, "If prospective tenants use an elevator to get to work or their home, it works. Otherwise, stick to single-story." It's questionable whether that was ever true, but the industry has certainly disproven that notion in the past decade. Multi-story is a rising trend for good reason. Let's examine why. Market Demands U.S. population trends provide an interesting backdrop to the rise of multi-story development. According to 2018 census figures, about 31 percent of all housing units are occupied by renters; and we know home renters are often more mobile and generally demand smaller unit sizes—and more frequently— than homeowners. Population growth and migration patterns are also pushing demand for multi-story storage. In recent years, suburban and exurban/commuter-town growth has outpaced urban growth. Smaller metro areas are growing faster than large urban ones. Urban revitalization and adaptive re-use of vacant warehouses or industrial buildings creates favorable environments for storage operators and developers. Millennials, who now comprise the largest segment of U.S. adults, are beginning to move further from home. Anecdotally, Matching site efficiency with market demand By Benjamin Burkhart Why Multi-Story Structures Are on the Rise we believe this generation may be most interested in vibrant life experiences, ease of social interaction, and value-based or temporary housing. At least in 2018, they're more likely to live in apartments and close to urban centers. They're a driving force behind the proliferation of micro or economy apartments in cities. Like generations before them, they acquire and need to store their stuff. Finally, self-storage tenancy is increasing. Here in America, storage has become another luxury, even if demand typically stems from negative or stressful life events. Established facilities benefit from the relative "stickiness" of tenancy. Every wave of new move-ins brings in another small batch of long-term renters, even if customers believe they have a "short-term need." The regular churn of life events bolsters market demand for the long term. Business-Model Benefi ts Despite the national trends, it can still be difficult to find the right market or site on which to build self-storage. In urban and suburban areas where growth is favorable for new projects, finding a 5-acre site on which to build may be impossible. Vertical construction offers great flexibility to compete in markets where existing commercial buildings may have consumed the best sites with enough acreage for single-story construction. In addition, sophisticated management and online-marketing platforms have allowed storage operators to drive new tenants to their locations, even when visibility isn't optimal. This doesn't mean visibility is no longer important; however, multi-story developments allow self-storage to gain visibility, even from a second-tier site. Another benefit is new multi-story storage buildings are often fully climate-controlled, meeting the demands of today's consumers. Climate control certainly isn't a requirement of multi-story construction, however. Some operators choose to offer these premium units on bottom floors, while providing ambient space on upper levels. Security can also be enhanced in multi-story. By limiting access to certain loading/unloading areas, security monitoring can be easier within a single structure. Tenant access can be restricted to particular areas or floors, and activity can be easily captured via cameras. Finally, there's facility aesthetics. I'd be remiss if I failed to mention how much more attractive multi-story buildings are compared to the basic metal construction that has been the industry standard for so long. Building larger, more prominent facilities give developers an opportunity to set the new business apart from competition with features that appeal to tenant demands for quality and security. Cost Considerations It's true that going vertical adds cost to a development. Smaller sites can also present unique challenges in terms of building timeline, erosion control, and construction coordination and staging. Still, multi-story projects are often the most economical. Multi-story buildings generally have smaller average unit sizes than their single-level counterparts and are often heavy on 5-by-10s, 8-by10s and 10-by10s. Even the addition of a multi-level building on a larger site can improve overall efficiency and net income. In locations where large spaces or RV-storage units 34 ISS I September 2018

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