2024 State of the Industry | Self Storage Virtual Workshop

Gabfocus Episode 56 | 2024 State of the Industry

The market feels anything but predictable in 2024. What economic trends are on the horizon? How are various markets and regions performing? How will all of this affect the industry? Join us as we dive deep into national and regional trends and look at prices, occupancies, and construction pipeline to help you plan for the rest of 2024.

Featured Speakers: John Chang
Moderators: Tommy Nguyen & Melissa Huff

Category: Economic Trends
Focus: Owners, Operators, & Investors
Aired: January 25, 2024
Duration: 1:17:56

Overview

If you don't have time to watch the whole session, here are some of our favorite parts:

At 4:05, our expert discusses economic trends he saw emerge throughout 2023.
8:30, John discussed why he was surprised that the industry did as well as it did in 2023.
Starting at 11:25, John discussed the importance of household formation as a metric that affects our industry.
At 13:30, our guest talked about his opinion on the health of the industry at the beginning of 2024.
16:00, our expert started discussing trends with street rates and how it is important to normalize them with your tenants.
Around 19:50, John talks about how the REITs are handling their street rates and whether or not independents should follow.
At 24:20, our guest covers ways to differentiate yourself from the REITs as an independent operator.
27:00, John touches on how occupancy rates are trending and demand drivers for storage.
32:00, our guest discusses whether or not the REITs are going into smaller or more rural markets.
36:50, John highlights some of the consolidation trends he expects as the industry matures.
At 40:40, our guest talks about funding going into the construction pipeline and how this could create challenges.
Starting at 47:20, John discusses where smaller operators can get industry data.
Around 50:45, our guest talked about technology and amenities that different generations are attracted to.
53:30, John discussed trends that he is seeing with Millennials and Gen Z.
At 57:25, John talked about trends that operators should be paying attention to over the next year and beyond.
1:02:10, John answers the question of the week!

Resources

Gabfocus Takeaway

The industry ended in a better spot in 2023 than most expected, and fears of a recession have diminished. 2024 is expected to be a year of normalization, which could include some further slowdowns as we settle back to a normal place after some incredible peak years. Competition will increase as well, which means it is important for independent operators to know their customers and know their niche. They'll have to get back to the basics and make sure that they are creatively marketing to the right audience and also providing an excellent customer experience to differentiate themselves from larger competition. Overall, the storage industry is starting 2024 in a healthy spot!

What are Gabfocus Sessions?

Gabfocus Sessions are virtual workshops for self storage owners, managers, and operators. Brought to you by the team behind Gabfest: StoragePug and Lighthouse Storage Solutions.

Each session features hand-picked industry pros who will dive deep into relevant topics surrounding our industry, share best practices, and explore trends in the market. It's our hope that these sessions help you navigate your self storage business better during these uncertain times.

Want to learn more about self storage? Join us on select Thursdays for Gabfocus.

Questions Answered in this Session

What significant economic storage trends did you see emerge in 2023?
What surprised you the most about 2023?
Which current economic trends are affecting our industry the most?
Going into 2024, how would you rate the health of the industry?
Where are we now with...
1. Street rates?
2. Occupancy?
3. Market growth/saturation?
4. Construction pipeline
5. Cap rates
6. Consolidation and w
Have you noticed any region or market-specific trends?
How should operators be approaching these in 2024...
1. Pricing and discounts?
2. Unit types and mix?
3. Revenue management?
4. Competitor analysis?
5. Expanding or building?
6. Investing?
Which trends should owners and operators be most concerned about over the next year?
What trends do you expect to emerge in the next 5 years?
Which one trend do you think will affect the industry the most in 2024?

Resources from this session

Awesome Quotes

“Once your operation is in place, you can become more dynamic with your pricing, but that requires data. You need some method of being able to record the data that you need to know whether your price is in the right place - whether you need to move it up or start giving some concessions.” - Warren Lieberman

“I never want to downplay to what someone else is doing. I'm better than they are, then I'm going to be worth a higher price. That's what value is. If you go out to a restaurant and get really good service, would you go back? Yes! What if it was pricier? You'd still go back because you got better service and a better product.” - Jim Mooney

"It's good to be informed on your competition. I don't want to ignore them, but I don't want to respond too strongly to them either." - Warren Lieberman

"We did a survey of 10,000 facilities on their pricing. We found out that two-thirds of those operators didn't change the price of a single unit of the course of a month." - Warren Lieberman

“Rate increases and value pricing are the number one ways to grow your revenue.” - Jim Mooney

"Tenants in more convenient units tend to be less price sensitive." - Warren Lieberman

"The size of the unit is only one aspect of what people are willing to pay for." - Warren Lieberman

Highlights

Foundational marketing strategies to have in place - whether leasing up or stabilized:

Website
Set up listings (Yelp, Google My Business, Apple Maps)
Social Media
Establish Local Partnerships

Lease up marketing strategies:

Lead Generating Strategies (like digital ads)
Aggregators (Sparefoot, Storagefront, etc.)
Awareness Campaigns (like billboards, flyers, and sponsorships)

Your average customer value
Find the average stay length of all tenants. Next take your economic occupancy and divide by how many units you have. That will tell you what the average customer pays.

Multiply the average length of stay by what the average customer pays, and that's the average value of a customer.

For example, if a customer stays for 12 months and pays $100 per month, then their value is $1,200.

Your average lead value

Figure out your closing rate (or conversion rate) i.e. how many leads do you turn into tenants? Multiply that by your average customer lifetime value to figure out what your leads are worth.

Pro Tip: see which lead sources are converting the best. It may be that certain sources have a higher conversion rate, so those leads are worth more to you than a source that barely converts.

Typical Lease-up timeline

According to our panelists, it's typical to see a 3-4% increase each month, putting your facility at 36% after the first year, and 72% after the second.

Alternately, you can look at your lease up goals through the lens of your units, aiming for 20 units rented per month.

For Nick and StorageMax, they pro forma their economic occupancy at 85% with their sweet spot at 92%.