Self-Storage Pricing: Sunbird Storage Takes The Lead

As children, most of us played “follow the leader.” We’d all line up behind one person, who’d move or motion in some manner, and we’d all have to follow suit. Those who failed to mimic the leader were knocked out of the game. 

But what if we refused to participate in the game to begin with?

That’s the approach Jason Koonin, CEO of Sunbird Storage in the United States and Bluebird Self Storage in Canada, has taken from day one. Although he’s fully invested in self-storage today, he came into the industry from the world of banking and finance in 2020 and was considered “an outsider.” Perhaps that’s why he’s never followed the leader.

“I had no experience or training in self-storage,” says Koonin. “But, as long as you have intellectual curiosity, I think coming in with an open mind, and not knowing how it's always been done, is one of the best things for you.”

Koonin recalls that he quickly noticed most players were simply mimicking what others were doing. “One of the REITs would implement a new strategy and then another REIT would make the same move, and so on. Soon enough, everybody figures they have to get on board too,” explains Koonin. “I looked at that and said, ‘Let's just do the opposite.’”

Sunbird Takes Flight

While Sunbird Storage may be relatively new to the scene in the U.S., Bluebird Storage Management in Toronto, Canada was hatched in 2020. When Koonin first launched that management platform, he made it a priority to expand the brand, focusing on quality and service. Today, Bluebird is Canada’s only coast-to-coast storage brand stretching across six provinces, with a total of 25 sites and 15 more currently in development. 

“After we scaled Bluebird across Canada, we wanted to launch a U.S. brand following many of the same principles of quality and service,” says Koonin, who explains that a trademark issue necessitated creating the name Sunbird when taking the brand to the U.S. However, some in the industry said that the markets were too different – that what worked in one country wouldn’t work in another. 

Koonin, who had zeroed in on North Carolina as the place to set up shop, had the perfect response for all the naysayers: “I'd say, 'well I figured things out in Canada, even though I live in North Carolina. So if I can make it work in Canada, I’m pretty sure I can make it work in my own backyard.'”

Now, just a year into its existence, Sunbird Storage has made a nest for itself in Winston-Salem, North Carolina with ten Class A properties throughout the state – two are operational with eight more in various stages of development. It takes a tailored, boutique-like approach to manage Class A self-storage facilities, and like Bluebird, Sunbird boasts premium, honest, transparent, and hassle-free self-storage experiences. All of this comes with a price tag for tenants, of course.

“I get a lot of questions from investors asking, ‘How can you price higher than the others in the market?’ They think a 10-by-10 is a 10-by-10 is a 10-by-10. But the experience is very different, just like in the hospitality business, at a restaurant or a hotel.”

Koonin goes on to explain that Sunbird caters to the type of tenant who would choose an upscale restaurant versus a drive-thru window, or a Ritz-Carlton versus a Motel 6. “There's a customer segment that will pay a premium in every industry. We can't ask for the highest price and not have the best service, the cleanest units, the safest buildings, the nicest amenities. So we do all of that.”

For example, Koonin says that while more and more facilities are cutting expenses and going to a remote management model, Sunbird naturally takes the opposite approach and instead strengthens its quality of service and staff. “There's a lot of customers who want a helpful person on site. They get that with us. They want to speak to someone local who’s on the property when they call. They get that too, because we don't rely on a centralized call center for sales or service.”

Koonin illustrates his point by noting that at one of his properties, someone drove their vehicle through the front gate, and getting it repaired was going to take weeks. “Rather than leave the property exposed, we paid for overnight security guards until the gate could be properly fixed. That’s the kind of service and security our tenants expect from us.”

No Pricing Games

One of the biggest differentiators between Sunbird and its competitors, and one that Koonin speaks quite passionately about, is the brand’s “365 Day No Rent Increase” guarantee. “At Sunbird, we won’t raise a tenant’s rent for at least a year from their move-in date,” he explains. “We had success with that model in Canada, and so we brought the same concept here. We even put it in our lease agreements.”

Much of the competition, of course, has been playing potentially dangerous rate games, and it has become the talk of the industry. These strategies involve luring customers with extremely low introductory or teaser rates and then raising them aggressively within a few months and often continuing the increases throughout the year. 

“If existing customer rate increases work so well, why aren’t they working?” Koonin asks rhetorically. “I mean, when you put in 50 percent new tenants per year at half the price, you will lower your revenue and you will lower your NOI. And, as tenants cycle through, some of these operators are not getting to the point where they're charging the optimal amount because tenants are moving out before they can increase them enough.”

Koonin says that while he really didn't expect to see the issues with this strategy come to a head until the third or fourth quarter, they’re already apparent in the second quarter results for the REITs. He proceeds to read aloud some key points from their earning reports: “Public Storage had a $22 million decrease for same store facilities, and revenue for those facilities decreased more than $9 million in the first six months of the year compared to last year. And both Extra Space and CubeSmart’s same-store NOI decreased more than 1 percent compared to the prior year.”

“It's basic math,” continues Koonin. “Bringing in new tenants at super low rates has real consequences for financial performance, and I think this was both foreseeable and avoidable.”

Like many in self-storage, Koonin also has concerns about these strategies damaging the industry as a whole. “Operators using these tactics are inviting regulatory scrutiny,” he says. “But when I talk to some people in the industry, they say ‘Well, we’re doing it because this is what everyone else is doing, and if it does come to that, it comes to that.’ I’m here to say, and show, that it doesn’t need to be this way and we don’t need to wait until that happens.”

Koonin says that while others may be tarnishing their brand in consumers’ eyes, by offering the 365-day no increase guarantee Sunbird is instead building trust and credibility. “It’s also building our NOI,” he adds. “We’re not giving away our spaces. And the way we conduct our business, there’s real value to these spaces. People are willing to pay for that value, the service I’ve talked about, and most of all the transparency.”

Taking The Lead

So is Koonin still an outsider? While he may not have come from a self-storage background, his success in the industry shows that such a label no longer applies. And, with much financial savvy to back him up, that’s why he is sounding the alarm that perhaps REITs and others using teaser rates are chasing the wrong metric. 

“You can boost your occupancy numbers with teaser rates, but how sustainable is that?” he asks. “If you cut your prices in half, will you get twice as many rentals? I've never seen that and I don’t expect I ever will. I would argue if you had higher prices, you'd have higher revenue. And that’s the metric that matters.”

Is his strategy for everyone? Koonin thinks about that for a moment. 

“I believe if you have a mid-sized or large facility, probably 40,000 square feet and up, a lot of my strategies would probably make sense,” he concludes, but makes it clear that it wouldn’t work for everyone. “I understand there's limited options for smaller facilities with fewer units, of course. They're probably not going to be able to afford a full-time staff, offer high levels of service, or premium security measures. So they’ll probably be competing on price, and that’s fine for some operators, there’s a market for that type of facility.”

Koonin holds up his finger, adding a caveat to that statement. “I’m talking about competing at regular prices. Using teaser rates will have them operating at a loss for a while, which most can’t afford to do while still servicing their mortgage. That’s courting bankruptcy, another unfortunate consequence of this strategy and another reason I hope it’s put to bed.” 

So, with no plans for Sunbird Storage to play follow the leader, and having found great success by breaking away from the pack, who knows? The industry may soon be following Koonin’s lead instead.

–

Brad Hadfield is the website manager and a news writer for MSM.