It can be stated without hyperbole that the quality of data in the self-storage industry is severely lacking. Since the inception of the industry, we’ve seen the proverbial chicken and the egg situation: Owner-operators complain that industry data isn’t where it needs to be, but those same owner-operators push back at the notion of sharing their data to improve the industry data quality as a whole. This is a hump that we need to get over in order to get to a place where we can leverage data to make more informed decisions, drive rental rates, and generally improve our development and operational decision-making.
With the help of property management software and analytics partners, operators could easily share timely, accurate data, safely aggregated, and anonymized to be used to improve operational performance and encourage educated development. So how do we get to a point where owner-operators are willing to share their data, and what is the value of this data to these same owner-operators? Simply put, industry data allows us to better understand and serve our markets and our customers.
When I began my career in the self-storage industry in 2003, facility occupancy was a closely guarded secret. I was doing feasibility study consulting at the start of the internet age and getting market rates still required at least a phone call. If you managed to get a store manager who liked to talk, you could, through the course of the conversation, get them to reveal their store’s occupancy. If not, the best way to glean a facility’s occupancy was to go rent a unit, walk the property, and count “yellow” locks and units. This was an effective, albeit manual and time-consuming, process, yet certainly not one that was repeatable on a daily or weekly basis. But the facility felt they were doing their job protecting corporate “secrets” while still giving it away for the cost of a 5-by-5.
Fast forward 20 years to the golden age of the internet. Prices and unit sizes are mostly available online to the consumer, and by using digital crawlers to comb through your prices listed on your website and to scrape thousands of websites daily, companies are able to aggregate that data and can track pricing and total square footage across 50,000-plus facilities nationwide. Similar technology combs through websites of municipalities looking for self-storage development projects moving through the pipeline. This high-tech data gathering has certainly contributed to the growth and success of the self-storage industry, but is the data as reliable as it could be? Did anyone ask you if they could scrape your website? There must be a better way. Others have self-reporting campaigns and surveys that are cumbersome and lagging—an additional chore for operators. While the data is more accurate, the timeliness to receive and report on that data leaves more to be desired.
Despite the proliferation of technologies that scrape unit pricing and availability data from the web, the fact remains that there are still owner-operators in the industry who are reluctant to share their data willingly. Perhaps these operators fear that by sharing their data they are providing their direct competitors with their “secret sauce.”
According to Gartner, a leading provider of data and analytics across a wide array of industries, these fears might not only lack a solid foundation, but safeguarding data could actually be detrimental to your business. In an online article published in 2021, Gartner notes, “Organizations that promote data sharing will outperform their peers on most business value metrics.” Gartner goes on to say that without a well-vetted reason, a lack of data sharing can actually hamper business outcomes rather than promote them.
Further, Open Data Institute suggests that sharing anonymized data has the ability to provide insight into an industry and help establish benchmarks. In an article published in January 2020, ODI states, “Companies in the shipping sector share safety data with trusted intermediaries like HiLo Maritime Risk Management in order to gain valuable operating insights in order to improve safety across the sector.”
While benchmarking and industry insights are certainly one potential benefit of data sharing, there are a litany of additional potential benefits that could follow if we had high-quality, safely aggregated industry data available. Companies like Reply are leveraging data from across companies and industries to provide a more holistic understanding of a customer or set of customers. According to a June 2020 article published by Harvard Business Review, “Pooling expertise and information enables a company to exponentially increase the value of the individual pieces of data. A combination of information from different environments and businesses can lead to the creation of a range of information that could not otherwise be derived from a single specific data set.” Here again, sharing data provides an accurate and cost-effective way to glean insights that would otherwise be cost prohibitive and daunting to gather as an individual operator.
There are a number of self-storage operators who also believe in the collective value of data. According to Don Clauson, CEO of Strat Property Management, “Keeping our data in silos means that only the largest operators have enough operational and market data to make informed decisions. It’s in all of our best interest to safely and anonymously provide our data.”
Let’s look more closely at how self-storage data is used in these two areas: development data and operational data.
Self Storage Data for Developers
Self-storage developers are searching for unmet demand. If the supply of rentable square feet in a market is less than the calculated demand for a market, the opportunity to build a new facility presents itself. How is the demand calculated? Developers turn to the Self-Storage Almanac, published annually by MSM. It gives the demand per person in the United States and then drills down to individual markets.
Calculated by taking the total supply of rentable square feet of self-storage in the U.S. or market, multiplied by the average occupancy and divided by the population, the demand figures presented in the Almanac are used nationwide in feasibility studies and reporting on the health of the industry. They are widely seen as the most accurate figures available to the industry. The information is gathered from their data partner, Radius+, one of the most tech-savvy data gathering companies in self-storage.
Developers use the figures from the Almanac to determine if the particular market they are interested in has unmet demand. By taking the population of a market and multiplying by the demand figure of the area, developers can determine the demand for self-storage in the market. Subtract out the rentable square footage of existing and/or planned development in the market and you are left with its unmet demand.
Multimillion-dollar decisions are based on these calculations and this data. Paired with average rent assumptions, developers decide whether the unmet demand justified the costs and projected returns of the project. Over the course of 30-plus years, the Almanac’s data has created many wealthy self-storage developers on the best data available. As technology has improved, so too can the accuracy of the data and the ease with which data sharing is made possible. In the end, making informed, data-driven decisions about development benefits us all.
Self Storage Data for Operators
The Almanac isn’t solely for developers though. Thousands of operators use the Almanac and other available industry data collection to assess key metrics regarding the performance of their facilities in a given market.
Every penny adds up over time. According to Mark Poole, director of operations at Liberty Investment Properties, adding one penny to your rent per square foot can make a huge difference. In his example, a 90 percent occupied facility making $1.00 per square foot on 50,000 occupied square feet going to $1.01 per square foot increases income by $6,000 per year. That may not sound like a lot to get excited over, but at a 6 percent cap rate, that’s an increase in value of $100,000, with a penny increase. If you look at data that tells you your rent per square foot is a nickel below your market, you have a half-a-million-dollar opportunity on your hands.
As we all know, market occupancy is another important gauge of individual facility performance. If my market is 92 percent occupied and my facility is only 80 percent occupied, what am I doing wrong? Are my rents at the right level for my market? Does my unit mix need to be examined? Is the quality of my product not up to par with the market? Are my online reviews impacting potential tenants? Is my website producing enough leads? Accurate data leads a sophisticated operator down a path to discover what levers they can pull to improve the performance of their investment.
Moving Forward With Data Sharing
As users of this data, operators can see how their rates compare to their market and adjust accordingly. Are they missing key technologies that their competitors have and their customers prefer? Developers can target markets where demand is undersupplied and bring new product to the market. There is no doubt the aggregation of this information has benefited all sides of our industry. However, the reliability of this scraped data has always been an area of concern for many operators in the industry.
The key to accurate data is the ability to access it from the source of truth, the property management software. The more accurate the data, the more accurate the decisions. As an industry, we know our data could be more accurate. The challenge has always been the ability to share the data, willingly, in a way that is seamless for the operator and doesn’t take away resources during the workweek to report it.
With the proliferation of property management software, the source of truth (the data) has moved to the cloud. The cloud makes the sharing of data easier, what should be as simple as turning on a “switch” for the operator. It would allow operators to share their data anonymously with data services of their choosing. The value of data from one facility, in one market, is essentially useless except to that owner. The value of data is derived from scale, statistically significant scale, that’s why they call it “Big Data.” Scale can be achieved anonymously.
This is not the first time this idea has been attempted in the industry. The Self Storage Association started a similar campaign 15 years ago with REIS. Sometimes, great ideas come too early. The work to create the switch then was far too burdensome for the software companies, and the manual process was too cumbersome for operators to adopt on a wide scale.
That was then; this is now. The next step, at this point, is the creation of that “switch” within our software. MSM has had discussions with management software companies in our industry, and they all believe the creation of the “switch” to be a relatively painless endeavor. Only one has created this capability to date, while the others seek to understand the need from their customers. MSM wants to help facilitate these conversations, so we’ve created a simple online form that takes less than 60 seconds to complete. You can fill it out at the end of the article or just click here.
Our hope is to be able to advance the industry by improving the quality and the accuracy of our data with a dataset that is reliable, willingly shared, and ultimately more useful to our Almanac readers. It can’t be done without the help of our software partners, but they need to hear from their users first. Please help us take the first steps by filling out our simple form.
Self storage data sharing shouldn’t be a chicken-and-an-egg situation in our industry anymore. Operators should want the best data available to make their decisions, and they should willingly be able to share their data easily to get it.
Additional Reading:
- Open Data Institute: 7 Reasons Why Businesses Should Be Sharing Data
- Harvard Business Review: How Shared Data Can Help Companies Better Understand Their Customers
- MIT Sloan School of Management: Building a Data Sharing Culture Within Your Company
- Gartner: Data Sharing is a Necessity to Accelerate Digital Business
- Forbes: Why Data Sharing Can Make Organizations Smarter Together
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Travis Morrow is the President of National Self Storage.