There is no doubt that Self Storage construction has enjoyed a boom both in Australia and the USA. Since late 2017 new Self Storage Developments have been built in key markets.
Growth is great but what are the impacts on existing Self Storage sites?
Since the early 80’s Self Storage has grown pretty fast. Once relegated to the back blocks of industrial suburbs, Self Storage emerged from hidden away locations to main street locations; often on high profile roads.
This has worked in the favour of larger operators as they had better budgets to afford A class locations.
Those front of mind locations also benefited brand awareness, now a major factor in lead generation and move in rates.
In markets where there we not too many Self Storage locations, added sites have not impacted existing sites drastically.
The key impacts to an existing site are:
- Move in specials – Invariably the new site will offer move in specials. These can as much as 50% below the normal rate. These discounted rates are hard if not impossible to compete with.
- Increased marketing – The new site will have budgeted to open with not only move in specials but will attempt to promote their brand. If they are a larger operator, they may use other onsite activations to attract customers.
- Dilution of the market – Unless the market was undersupplied, the market becomes diluted. Each site has to work harder for each move in as more competition comes online.
- The new site is better – Just about every new site is better than the ones already in the market. Customers like “new” as it equates to “clean”.
- Potential for Key staff to be poached – Existing staff at established Self Storage sites are targets by new operators. No one knows the market better than existing staff.
- New technology – The new operator may use new technology from electronic door locks to remote technology reducing staff costs.
We can’t underestimate the impact of new technology that new operators have access to. Implementing these new door locking systems, combined with online move in capability, increasing market awareness all impact existing stores.
Can I compete?
Yes, you can effectively compete with any new Self Storage operator. Existing sites have experience and an understanding of the market. Talk toy your marketing team and conduct an objective audit of your site and ask yourself one question: “Would I rent a space from my site or the new one down the road”
The answer is more than likely the new one down the road!
There is business for everyone and staying competitive is more than reducing prices to match. Expect the new player to mess with the market for 3-6 months, but your audit may reveal some shortcomings that only investment will fix.
Double up on attention to customers, make sure your website is up to date. Ensure you have good Google reviews.
Resist the temptation to match the new sites opening specials. Educating the market to expect 50% of the normal price for a space misinforms and devalues your market and your ability to raise prices.
There is evidence that even larger operators spend more when new competition comes into the marketplace. Extra Space in the US has ramped up first Qtr Advertising spend by 24% to preserve let up rates in certain markets.
The outcome of this spend was that same store revenues grew over the same period than last year.
You can compete!