Infinite Possibilities

The Intensifying Need For Self-Storage Data

Data is broadly defined as “facts and statistics collected together for reference or analysis.” As such, data can come in many forms and focus on an infinite number of topics or subject matters.

Even within the self-storage industry, there are numerous data sets being collected from various sources and utilized by a wide range of users. From customer demographics to rental rates by unit size and type—and everything in between—the sector is seeking more data than ever before.

Why? For starters, as the definition loosely explains, the information being collected enables self-storage professionals to analyze their particular segment of the industry and make better decisions relative to their objectives. Data is used to improve marketing efforts, determine unit mixes, choose construction sites, and so much more. Besides, data is also being required by astute lenders that don’t want to be left holding the keys of floundering self-storage properties.

Delving Into Data
In the not-so-distant past, before the advent of the internet, the self-storage industry primarily relied on data collected by the U.S. Census Bureau, statistics printed within MiniCo Publishing’s annual Self-Storage Almanac, and “boots-on-the-ground”information to make development decisions. Numbers were crunched and figures were finagled to determine the feasibility and earning potential of a proposed project.

While these resources are still invaluable to the decision-making process, several new data providers have entered the sector to meet the growing demand for accurate and up-to-date information. In addition to Union RealTime, the official data partner of the annual Self-Storage Almanac published by MiniCo, new entrants include Yardi, RTR, and REIS. What’s more, new and diverse studies are frequently being conducted in attempts to provide insights and draw conclusions about the real estate asset class. For instance, the Self Storage Association’s “2017 Self Storage Demand Study”, which is incorporated into the 2019 Self-Storage Almanac, provides data based on the results of self-storage customer surveys to shed light on their preferences and behaviors.

Data Details

Within the industry, the majority of data being collected and utilized falls into one of these four main categories:

Demographic Data – Typically procured from the U.S. Census Bureau and/or Claritas, demographic data provides information on a market area’s population and the characteristics of that population such as race, ethnicity, gender, age, education, occupation/profession, income level, and marital status. Of particular importance relative to self-storage is the market’s population, total number of households, average household income, and employment growth.

However, it’s important to note that, according to Ken Nitzberg, chairman and CEO of Emeryville, Calif.-based Devon Self Storage, the total number of households is more important than its population due to the significance of overlap. As an example, a market may have 10,000 people, but only 2,000 households. “Households rent storage units,” he says, further explaining that an individual living in a one-bedroom apartment counts as one household, but so does the family of six that resides in a single-family home.
Development Data – Also referred to as new starts data or new supply data, development data attempts to determine how much new self-storage supply is in the pipeline for a given market area. It is imperative to the prevention of market saturation.

Development data is a relatively new data set for the industry; as a matter of fact, this is the first development cycle in the history of self-storage in which development data has been available. This information is being collected by several companies new to the industry, including New York City-based Union Realtime, LLC, one of the main data providers for the 2019 Self-Storage Almanac and the supplier of Mini-Storage Messenger’s monthly “Data Intelligence” column; STR, Inc., a Hendersonville, Tenn.-based company that tracks supply and demand data for multiple market sectors; and Yardi Systems, Inc., a Santa Barbara, Calif.-based software company that provides self-storage research data through its Yardi Matrix platform. STR, which has been collecting data for the global hotel industry for more than 35 years, uses the same metrics as its hotel model to produce data reports for the self-storage industry. These companies obtain development data from self-storage owners, operators, and developers to generate data about new supply. They also have in-house researchers who collect publicly available information from planning commissions, building committees, and county courthouse records to keep up with new properties as they evolve or, in some instances, dissolve.

Performance Data – Performance data is an all-encompassing term for the numerous data sets of facility operations. It includes information about occupancies and rental rates for various unit sizes and types. This data is gathered manually from the internet by scraping the websites of self-storage facilities for rates and/or collected from property management systems.

While both methods produce rental rate information, Nitzberg warns that “teaser rates” should be taken into consideration. Since teaser rates are the discounted rates used on facility websites to attract online customers, they may not provide an accurate snapshot of the market’s actual street rates.

Performance data is becoming increasingly more valuable due to increased competition. Per Cory Sylvester, principal of Union Realtime, which provides data through its Radius and Advocate platforms, rental rate data collection is especially important because it offers a real-time view of a market’s rates, including any volatility and seasonality of rental rates, which he notes is critical for seeing the “full picture” of a market area. Additionally, occupancy data, the latest data set to be collected, is what Sylvester calls “another piece of the puzzle”, stating that will help users understand markets on a more granular level.

Transaction Data – Also known as “big data,” this is the move-in and move-out information primarily collected by the industry’s real estate investment trusts (REITs) and large operators. Transaction data is used to determine consumer behavior and demand drivers; it’s even utilized when setting rental rates and creating concessions.

“Transaction data is the real key,” says Aaron Swerdlin, vice chairman of Newmark Knight Frank (NKF) Capital Market’s Self Storage Group, about the data that developers should focus on. “The larger operators have a huge advantage with drawing conclusions.”

Sustainable Development
The different kinds of data discussed in the sidebar on page # are imperative for determining the overall health of a market as well as understanding trends. It’s also being used for what Shawn Hill, principal of Chicago, Ill.-based The BSC Group, calls “sustainable development”.

Sustainable development is the practice of adding new self-storage supply without saturating markets past their level of demand. Development data is critical to this concept. “It’s beneficial for everyone to know who’s building what, where, when, and how,” says Hill, who adds that the time lag with entitlements during the planning and building stages can prove to be problematic. “Without data it’s speculation.”

Deprived of data about new supply, developers run the risk of tipping the market’s supply scale from undersupplied or equilibrium to oversupplied, which can be detrimental to all the self-storage facilities in the area. Although there is far more development data available to the industry than ever before, unfortunately, as Hill mentions, there is still missing data. For example, not all new supply is included in the data and some supply remains in the data even after a project is scrapped.

Nevertheless, compared to the industry’s last development cycle, the sector has an abundance of data at its disposal. And this hasn’t gone unnoticed.

In fact, Hill states that there’s been a “call for data” from the lending community and institutional capital partners. “They are demanding it,” he says, adding they’re more educated about the industry and its performance. “They are competing to win business, but they still want to make good decisions.”

For that reason, and as a result of the institutionalization of self-storage, lenders have begun requesting data about self-storage supply and new development before making loan considerations—something they have required from other real estate sectors for years as a way for mitigating risk. However, Hill points out that nowadays they will likely have accessed data to use to draw their own conclusions. When it comes to approving loans, he cautions that it’s “very easy to say ‘no’, and much harder to say ‘yes’.”

“Lenders need to see up-to-date and complete data,” Hill says. “They are not willing to make a leap of faith. They will lean to the conservative side if they have to make their own conclusions.”

Combating Competition
Clearly, data assists developers who are attempting to make decisions about potential sites for new development. The data has helped developers find opportunities beyond the major markets as well, hence the robust uptick of new supply in secondary and tertiary markets. What’s more, new data sets are frequently being added to the data providers’ platforms to further assist with site selection; for example, Union Realtime’s Radius platform now offers information about opportunity zones and flood maps.

Undoubtedly, data is streamlining the due diligence process, especially given the fact that various types of data are being compiled into single data platforms. However, it’s also encouraging self-storage professionals to reevaluate the longstanding metrics that have been used to make development decisions. As Sylvester reiterates, it all comes down to having a granular understanding of a given market and its economics. Moreover, industry professionals need to “prioritize how they think of per capita square footage in isolation,” he says, adding that markets may or may not have structural demand for self-storage. In other words, developers should take the area’s dwellings into consideration; homes with basements, attics, and garages may have less demand.

Sylvester also advises developers to consider expanding the potential market radius. “Don’t isolate it to just a three-mile radius,” he says. “A development within four or five miles will still impact a facility.” Indeed, the center point of a trade area can create a “domino effect”, says Sylvester. “Customer overlap and competition overlap are two elements to think about.”

Thankfully, market research can mitigate the impact of new supply. “Good data helps combat competition,” says Janet Tracy with STR, Inc. “It will become more valuable over time, especially as development slows down. Competition is becoming fierce.”

Besides being used to determine the feasibility of new supply, data can help existing self-storage facilities in several ways. For instance, rental rate data can be used as benchmarks and comparisons for operators who want to adjust their rates to be more competitive within their markets.

The good news is that rental rate data is becoming more in-depth and readily available. At present, according to Tracy, rental rates of climate-controlled vs. non-climate-controlled units is one valuable data set being sought out by the industry. This specific data can be helpful for setting comparable street rates for new developments as well as expansion and conversion projects.

Additionally, rental rate data is used to monitor fluctuations that can be helpful for analyzing a market’s health as well as underwriting facilities. “We’re trying to triangulate three things: NOI, rates, and future price,” says David Dent, senior real estate market analyst for Yardi, who mentions that rents have softened in some markets due to new supply. “It tells us how each metro is performing and helps us understand what’s happening in those cities.”

Focus On Customers
Data is also being used in various ways to attract customers. For starters, there is an industry-wide interest in determining the demand drivers for self-storage. However, similar to other aspects of the storage business, demand is highly market specific.

“The more we dig in, the more we find it is difficult to find common demand drivers,” says Swerdlin. “Demand drivers differ greatly by market.”

Therefore, Swerdlin suggests focusing on the demand drivers of the market when making business decisions. He also reminds readers that self-storage is “very much a convenience-based use”, adding that the majority of potential tenants will not drive a farther distance to save money.

According to Dent, data should answer this question: What brings tenants to a facility? “It’s not a facility without renters,” he says, adding that operators should use data to answer several other questions, such as “Who are the tenants?” and “What’s the best design/unit mix for the market?” Good quality data can provide solutions to these queries and countless more.

Swerdlin concurs, recommending that self-storage owners and operators collect and analyze their own data as well. Move-in and move-out surveys can be used to improve a facility’s operations—from its features, amenities, and security to its marketing and advertising.

Speaking of marketing, data can help with that! Therefore, Chiswell encourages operators to record info about each customer and review the operational data on a regular basis. “Demographic data is important for marketing,” says Jim Chiswell, president of Purcellville, Va.-based Chiswell & Associates, LLC. “It’s used as a measuring stick. Collect it and use it! You need to know your customers.”

Finding Data

From print to the internet, self-storage data is available in various formats. Here’s a list of the data resources mentioned in this article:

Claritas – Delivers custom audience segments and consumer insights for more than 120 million households. Visit www.claritas.com.
U.S. Census Bureau – Demographic data available at www.census.gov.
Self-Storage Almanac – Available from MiniCo Publishing in both print and digital formats. Visit www.ministoragemessenger.com or call (800) 352-4636 to purchase a copy.
Self Storage Association’s “2017 Self Storage Demand Study” – Visit www.selfstorage.org/Products-Services/Books.
STR self-storage reports – Visit www.str.com/self-storage.
Union Realtime’s Radius and Advocate platforms – Visit www.unionrealtime.com.
Yard Matrix platform – Visit www.yardimatrix.com/Property-Types/Self-Storage.

In addition, Chiswell points out that simply switching from gathering customers’ five-digit ZIP codes to nine-digit ZIP codes can produce marketing opportunities. Pulling a ZIP code report can show operators where customers live and where marketing can be done to attract more tenants. As an example, if you know of an apartment complex within a specific ZIP code but that ZIP code is missing from the report, Chiswell says it is time to arm your facility manager with a five-lb. box of chocolates and send him/her to the complex to talk with the manager about your self-storage site’s referral rewards program.

Of course, tracking the costs and effectiveness of your advertising efforts is crucial to get the most bang for your buck. Although smaller operators may not have access to keyword data like the “big guys”, anyone has the ability to ask a customer how he/she found the facility. “Adjust accordingly,” says Swerdlin. “Focus on the ones producing the greatest returns.”

No End In Sight
It’s clear that data is here to stay. The need for industry-specific data will only increase over time, as will the amount of data being collected. What’s more, data will continue to evolve to meet users’ needs.

For instance, Dent foresees data becoming more specific and more customized. “Customization will be a big opportunity,” he says, noting that it will drive the sophistication of data and the industry.

From broad to specific, the prospects for data are as infinite as the numbers of pi.

“Data will continue to play a bigger role,” says Chiswell. “Whether buying, building, or running a facility, if you’re not paying attention to the data, the industry is going to pass you by.”

Erica Shatzer is the editor of Mini-Storage Messenger, Self-Storage Now!, and Self-Storage Canada.