It’s everywhere. Virtually everyone uses it. It defines modern life, with both good and bad effects. And it keeps changing and growing.
It’s technology. It has changed how industries, including self-storage, do business, how consumers buy and use products and services, and in many other ways how people live their lives.
Various technologies continue to improve self-storage facilities’ ease and efficiency of operation and usage. These technologies enable a host of functions, including signing the lease, paying rent, accessing the storage site and unit, and managing security, accounting, payment processing, documentation, and tenant protection plans, among many others.
Most, if not all, of these technologies are adapted for use on mobile devices, and some include artificial intelligence (AI) and machine learning. While technology makes these functions easier and more efficient for operators and tenants and bolster operators’ bottom lines, it also presents possible pitfalls for operators to avoid.
Tech’s Impact On Self-Storage
The Alexandria, Va.-based Self Storage Association estimates the industry generates $34 billion in annual revenue in the United States. In roughly the past two years, despite the COVID-19 pandemic’s worldwide disruptions, and in some ways because of it, self-storage has outperformed the traditionally main classes of real estate: multifamily, office, retail, and hospitality. Technology has played a significant part in the industry’s strong performance and promises to continue strengthening it.
Anne Mari DeCoster, chief operating officer for Storelocal Storage Co-op, based in Newport Beach, Calif., says technology is developing “faster than ever with more disruptive potential than ever.” She spoke at the Storelocal Innovation Summit in February. She asked at the summit, “In 20 years, what will the world look like, and what can we do now to prepare?” “Exponential” technologies are reshaping the world.
DeCoster cites the COVID-19 mRNA vaccine as a prime example of an exponential, disruptive technology. She says technology’s disruptive power is also improving self-storage, which has a strong foothold because “our business is based on Americans’ love affair with their stuff.”
The industry’s business owners have a history of adopting technology more slowly than many other industries, DeCoster says, but they should ask themselves whether they want to be disrupted or would rather be the disruptor. Disruptors must take risks and invest to keep up with changes.
Jeff Adler, the Englewood, Colo.-based industry principal of self-storage for Yardi Systems Inc., says technology “is incredibly important,” generally, but especially in self-storage because it’s a “consumer-facing industry” that lends itself to remote transaction processing.
“It’s more of a transaction and less of a relationship,” Adler says. “It’s not as if I live at the storage facility where I want to have a personal relationship with the manager or my other tenants. No, this is a transaction. I need space. I want things to be easy. It’s not central to my life. It’s a thing that I do that I need. I want it as painless as possible, as easy as possible.”
The pandemic has increased the need for self-storage among individuals and businesses. For example, more people switched to working from home and needed to create a home office. Some converted space to a gym. Both of these created a need for storage in order to free up space at home. Some businesses that closed their offices put key equipment and supplies in self-storage for easy access.
Chadwick Macferran, director of marketing for Scottsdale, Ariz.-based PTI Security Systems, says the pandemic has attracted new self-storage investors and agrees that it has driven increased technology adoption by tenants and operators. Portfolios are looking at opportunities to improve efficiency and increase automation with unmanned and partly manned operations. Acquisitions and consolidations have shown a “huge uptick” in the past year. All these trends rely on remote access to software applications.
Online reservation systems also play a bigger part in self-storage for operators looking to rent and occupy units as quickly as possible, Macferran says. Security software provides better data, key performance indicators, and reporting capabilities. These tools enable operators to better understand their businesses. Data dashboards allow them to quickly diagnose and correct problems that arise. This is especially important for multi-site portfolios, which need to monitor properties across regions and isolate or aggregate data from multiple properties.
Self-storage security has traditionally focused on a facility’s perimeter components, such as the gate, entry keypad, and walls, according to Macferran. But operators are also increasingly focusing on interior security components, such as unit security with alarms and smart locks, access-restricted areas, and improved visibility with cameras and lighting.
Macferran has seen some use of AI (artificial intelligence) with video, though little overall increase in this technology’s adoption, “but there hasn’t been a conveniently packaged solution for the masses.”
The internet of things (IoT) also has drawn bigger operators’ interest, but the industry hasn’t widely adopted it, either, Macferran says. Techterms.com defines IoT as “an umbrella term that refers to anything connected to the internet.” This includes computing devices such as smartphones, laptops, and tablets; security cameras; cars; home appliances; and wearable electronics, among others.
The self-storage industry is already working on things such as biometric locks and automated entry, Adler says. With IoT, “the building itself talks.”
“Those things are coming, and we will be part of that in terms of either integrating to those providers or offering elements of those,” says Adler.
Yardi is also testing a product in the multifamily sector called Chat IQ, a chat bot attached to the operator’s website that uses AI and machine learning to better respond to consumer interactions than with human-operated chat sessions contact centers.
AI is becoming more commonplace in everyday life, says Mike Roberts, executive vice president of business development and operations for Plano, Texas-based XPS Solutions.
“In the call center industry, we don’t view it as a threat but rather as a potential trap for operators looking for a lower-cost substitute for live human interaction, which unfortunately leads to a diminished-quality customer experience for many tenants or prospects who are simply looking for friendly help,” Roberts says.
AI has undoubtedly changed how XPS Solutions does business, and it will continue to shape how it provides customer service. “However, we are still a few years away from mass adoption, and we believe there will always be human interaction desired in general,” Roberts says, “… but a hybrid model that includes AI will probably be the happy medium that is eventually embraced.”
Tech Adoption
Macferran shares the view that traditional customer service still has its place despite expanding technology. For example, operators are considering semi-manned operations more in which an employee might be based at one location but regularly visit nearby properties.
“This leverages automation but doesn’t sacrifice a personal touch or eye on the property when they need it,” says Macferran.
Roberts says XPS is “confident human interaction will never be eliminated.”
“The tone of voice, a particular matter that a bot cannot address, or just someone who wants to talk for a moment, will continue to be a part of the customer experience,” Roberts says.
DeCoster agrees that customer service “still requires high touch, even in a high-tech world.” Without that personal touch, consumers who want it will do business elsewhere. If an operator bases its business model on remote management, “it is designed for tenants who want today’s technology, automation, and on-demand access to use your business. Only you can determine the right mix for your business, and it usually takes trial and error.”
Traditional customer service means employees serving people in traditional ways, in person, but increasingly remotely as well. Technology can cut labor costs, which can be a big component of operational costs, Adler says. While the need to have that personal touch may continue, providing seamless customer interactions cuts costs and offers “increased consumer welfare and makes the investment more profitable. Everybody wins.”
Adler believes self-storage has led the way in technology adoption among the top real estate classes because its needs drive tech adoption. Operators emphasize “front-of-the-house automation” comprising leasing, lease inception, and customer access. But those components often are “cobbled together.” Yardi has combined them in one package. That integration lowers costs.
According to Adler, one of self-storage’s big advantages is that 85 percent of customers make recurring payments in a recurring format. This lowers costs receivables management and collection.
“A lot of property management systems have to dump into a general ledger accounting system,” Adler says. “Our system has both the property management capabilities and the accounting capabilities built together, which also enables investor reporting at the same time. It allows us to have maintenance, payables, electronic payables, and the back-office part wrapped in together. It’s not rocket science and not a lot of fun. But if you’re going to be in the self-storage business, those are necessary conditions. You just have to deal with them.”
Mobile accessibility, with all this technology, also has become a requirement. But Roberts says property owners need to evaluate the purpose and benefits of mobile apps. Do they solve a problem and make it easier for customers to do business with you and your facility?
For example, XPS offers a free app called MyStorPal, which allows customers to pay anytime, access gate codes, and other tenant information, and see their storage unit’s contents.
“This is designed with one larger idea in mind, to improve the customer experience, both for the tenant and the property,” Roberts says. “Ironically, as a call center, we also developed MyStorPal to reduce the number of phone calls for self-storage facilities. So, if we can provide a preferred contact medium to the tenant that also saves them time and allows them to make a touchless payment, or prevent that phone call for their gate code, we have achieved our goal.”
Tech Pitfalls
Adler says “cloud” security is “a massive problem, challenge,” because the cloud contains sensitive personal information such as Social Security numbers and credit card numbers.
“It takes some organizations of some meaningful size to be capable to keep all of it secure,” he says.
Cloud computing is “the practice of storing regularly used computer data on multiple servers that can be accessed through the internet,” according to merriam-webster.com. The National Institute of Standards and Technology defines it as “a model for enabling ubiquitous, convenient, on-demand network access to a shared pool of configurable computing resources (e.g., networks, servers, storage, applications, and services) that can be rapidly provisioned and released with minimal management effort or service provider interaction.”
Another aspect of security is reflected in “some deep concerns in our industry that maybe some of the service providers don’t have the best interests of the industry at heart and aren’t necessarily financially stable,” Adler says. “If all the eggs are in one basket, how stable is the holder of the basket?”
Cyber security “is huge across all industries,” says Adler. “At some point in time, I don’t think any organization will be perfectly safe forever. So many attacks from so many directions.”
Adler speaks of self-storage’s “ecosystem”—“all the capabilities needed to run a self-storage facility.” That’s a long list, and it includes online leasing, site access, call center, payment processing, property management, tenant protection plans, accounting and payables functions, and sometimes utilities management function.
Per Adler, technology use comprises three stages. The first one is technology adoption to improve the organization and its operations. The second is improvements in costs and simplicity. And the third is “who holds the hands of that.”
“I would say self-storage is very far down the first set of waves of technology adoption,” he says, “of finding elements of technology that will improve operation, profitability, and consumer experience. It’s just beginning to think about the second wave, which is how does one reduce the total cost and complexity of all those capabilities? And the industry may be beginning to understand the third level, in whose hands is that capability vested.”
Adler believes the self-storage industry will continue to adopt technology because “seamless interactions are in the consumer’s interest and in the company’s interests for cost reductions.” It’s unclear whether the technology adoption rate will speed up because it has adopted tech relatively quickly. But technology must be provided a “very reasonable costs because the sites’ budgets lend themselves to fairly cost-effective solutions.”
“You can’t have very expensive things,” says Adler. “If your rents average $100 a month and maybe your average number of units can scale anywhere from 200 to 800, it would be fairly efficient from a cost perspective in order to provide those solutions at a reasonable cost that can gain wide adoption. The market’s large and the need is there.”
Adler also covers investment and research for Yardi Matrix and says the self-storage industry’s performance has been “unbelievably positive,” not only by simply surviving during the pandemic. Occupancies and rents have risen “almost uniformly in places where people move into but also places they move out of.”
“Any dislocation among populations benefits the storage industry,” Adler says. “Get them coming and going, as it were. The financial results of industry have been stellar. It has attracted tremendous amount of institutional capital, who have tried to put their money to work. There is a lot of capital looking to be deployed in the industry. A lot that should be deployed into development, but the cost structure makes it difficult.”
He goes on to say, “Therefore, operating your facility to maximum capability is absolutely in your financial interest. And if you’re going to stay on top of providing great customer experiences, you’ve got to be on the forefront of this. Because if you don’t do it your competitor will. We’ve been talking about operational execution and the role of technology in it.”
Viewed from any angle, technology is amazing. It’s revolutionary and it’s complex, but in the end, it’s designed to make things simpler. For businesses, the goals of using more technology necessarily involve serving your customers well so they’ll keep doing business with you.
“If there’s anything we’ve all learned from reviews and reputation management, a good reputation can be ruined very quickly when shortcuts to customer service or customer experience are arbitrarily imposed on good, paying customers,” Roberts says. “Don’t allow leading edge to become bleeding edge.”