Self storage facilities a uniquely specialized type of commercial property

Commercial real estate properties are defined as buildings and land designed to generate profit through rental income or capital appreciation.

Unlike residential properties, these assets are utilized for business purposes. The category includes a diverse range of property types such as office buildings, retail spaces like shopping centers and strip malls, industrial facilities including warehouses and factories, multifamily residential complexes, hotels and resorts, healthcare facilities, and self-storage properties.

Storage Facilities

Storage facilities occupy a unique niche within the commercial real estate sector, distinguished by their specialized design and diverse applications. Unlike traditional office or retail spaces, these properties are purpose-built to accommodate a wide array of storage needs, ranging from industrial and warehouse storage to more specialized functions such as cold storage, document archiving, and vehicle storage. The adaptability of storage spaces to various purposes - whether housing manufacturing equipment, retail inventory, temperature-sensitive goods, important documents, or personal vehicles - sets them apart from other commercial properties. This versatility allows storage facilities to serve a broad spectrum of clients, from large corporations to small businesses and individuals.

Self-Storage Facilities

The inclusion of self-storage options adds another layer of flexibility, catering to both business and personal storage requirements. This multi-faceted approach to space utilization, combined with typically lower operational costs and maintenance requirements compared to other commercial properties, makes storage facilities a distinct and often lucrative segment of the real estate market.

Self-storage facilities have a different day-to-day operation compared to other commercial properties.

Day to Day Operation of Self-storage facilities

The unique operational model of self-storage facilities sets them apart from other types of commercial real estate. Here are some key aspects of their day-to-day operations:

Customer Interactions

There is a high volume of short interactions with customers.There are regular move-ins and move-outs, often without staff assistance and as a result there is less need for ongoing customer service compared to other commercial properties

24 hour Access Management

Self-storage operations require extended or 24 hour access for storage tenants. There is some form of an automated entry systems (e.g., key cards, access codes) and a need for constant security monitoring.

Maintenance

Self storage units require less intensive daily maintenance compared to office or retail spaces. There is continued focus on cleanliness, pest control, and security. And for climate-controlled warehouses there are regular checks on unit integrity and climate control systems

Lease Management

Self storage involves a high volume of month-to-month short-term leases with frequent turnover of units and invoicing system based on automated billing and payment systems.

Marketing and Sales

Due to high turnover continuous efforts are made to attract new tenants, which often relies on a strong online presence and local advertisting in addition to good word of mouth referrals. Competitive pricing strategies may change frequently based on occupancy rates.

Inventory Management

High turnover requires a constant monitoring of available units. Often dynamic pricing based on unit size, location within the facility, and demand can be employed to ensure the highest level of occupancy and monthly revenue.

Ancillary Services

Some facilities in addition to offering short-term lease for storage may also generate addition revenue through the sale of packing supplies and moving truck rentals. Most if not all also offer insurance options for the tenant's property which is not covered for loss by the storage provider.

Regulatory Compliance

Storage providers must comply with contract law and the handling of lien sales for delinquent lease payments on storage units. They must adhere to specific storage facility regulations which is detailed in the lease agreement.

Lein laws, tenant rights, insurance requirements, security standards for surveillance and lighting systems, fire safety for storage of flammable materials, climate control, zoning laws, contract requirements for rental agreements, rules about late fees and other charges, privacy laws regarding the handle of and protecting tenant information and rules about entering rented units. Additionally, there are rules for disposing of abandoned property and ending of lease.

These operational characteristics create a unique business model that requires specialized management skills and systems, setting self-storage apart from other commercial real estate types like office buildings or retail spaces.

While not required by law in Texas, many storage facility operators pursue professional certifications, such as those offered by the Self Storage Association (SSA) or the Institute of Real Estate Management (IREM).

Why Do People Need Self Storage Services

The "Four D's of Life" is a concept often used in the self-storage industry to describe common life events that often lead people to need self-storage. These are death, divorce, downsizing and dislocation.

Let's explore each of these in relation to self-storage usage:

Death:

When someone passes away, their belongings often need to be stored while the estate is settled. Family members may need time to sort through possessions, leading to temporary storage needs. Inherited items might require storage if there's no immediate space for them.

Divorce:

During separation or divorce, one or both parties may need to move out quickly, requiring storage for their belongings. Shared possessions might need to be stored until ownership is determined.Temporary housing situations during divorce proceedings often necessitate storage solutions.

Downsizing:

As people age or experience lifestyle changes, they may move to smaller homes, creating a need for extra storage. When transitioning from a house to an apartment or assisted living facility, excess belongings often go into storage. Young adults moving from family homes to smaller first apartments may store extra possessions.

Dislocation:

Job transfers or relocations can create temporary storage needs during the move. Military deployments often require long-term storage solutions for personal belongings. Natural disasters or home renovations may necessitate temporary storage of household items.

These "Four D's" represent significant life changes that often create sudden or unexpected needs for additional space, making self-storage an attractive solution. Self-storage facilities often market their services with these life events in mind, recognizing that they are common drivers of demand in the industry.

It's worth noting that while these are major drivers, they're not the only reasons people use self-storage. Business inventory storage, hobby equipment storage, and general lack of space at home are also common reasons for using self-storage facilities.

The first self-storage facilities originated in Texas in the late 1960s.