Three years ago, the CEO of Public Storage, Ron Havner, gave a keynote speech at the 2015 SSA Fall conference and said, “...the Achilles heel of our business, and any business for that matter, is new supply.” Development in self storage was at an all-time high, and he speculated as to when the party would end. Now, in summer 2018, it seems the party is, in fact, over. Miami is hitting a supply and demand breaking point. New York City's storage boom has led to a temporary halt on new builds. Much of Texas, in cities like Houston, Dallas, San Antonio, and Austin, is oversupplied and facing fierce competition. Omaha is at risk of being overbuilt, and Oklahoma City’s market is nearly topped out. Portland, Denver, Raleigh, and Nashville also top lists of cities in danger of oversupply.
However, self storage development experts like Jernigan Capital are quick to shut down worries of oversupply destroying to storage market, noting sophisticated construction and strong market data suggesting population will absorb new supply. If you feel like your market is under threat of being over-developed, have no fear - it’s completely possible to ride the development wave and survive without crashing.
If your market is overbuilt or at risk of being overbuilt, there’s good news: a saturated market is a clear sign that your location is brimming with growth and business opportunity. For example, every hip city’s downtown is chock-full of new and trendy restaurants, even though there are already plenty of options for diners. Similarly, there are hundreds of drive-through coffee choices in growing suburban areas, and even though you can pick up a latte at any McDonald’s, Starbucks continues to thrive throughout these areas. Succeeding in an overbuilt self storage market is achievable if your storage facility has a competitive advantage.
“The combination of pent up demand, continued strong population growth in excess of 1% per year and increased mobility of families and millennials can be expected to produce orderly absorption of new supply in general.” COO of Jernigan Capital
Building a competitive advantage is all about finding your target audience (a growing sector of your market’s population), marketing to them successfully, and delivering on your promise. You don’t have to be the next startup or reinvent the wheel - in fact, customers appreciate something that’s familiar and easy to understand. To succeed in your saturated market, you’ll need to find a niche and differentiate your business.
Remember that old “Think Different” Apple commercial? In order to succeed in a trouble spot for overdevelopment, your storage business needs to be different from every other Joe Schmo storage place on the block. To win, you’ll need to consistently capitalize on the unique angle that only you can bring to the industry. Here are three ways you can stand out from the crowd, highlight your unique strengths, and build a competitive advantage in an oversaturated self storage marketplace.
Seena Sharp, a leader in competitive market intelligence, argues that the key to success in a competitive market is change. If you’re still marketing to the same customers you were ten years ago, you’re missing out on the most important thing in your market - growth. As a small storage business, you have the benefit of being able to make fast marketing decisions and adjust your business strategy rapidly. Use your business’s strengths to your advantage to market to new, growing populations and bring in new renters year over year.
“Change is a synonym for opportunity. If you don't know what's changing—with your customers, competitors, distribution channels, alternative uses, features and more, your customers will buy from those who do.” Director of Sharp Marketing Intelligence
Use a fast-growing, competitive market as an opportunity to cater your storage business’s services to growing populations and changing market demographics. If your new target renter skews young like in Nashville, reach them with online conveniences like a mobile-responsive website and online rentals. If you’re targeting a growing retiree population like that of the Phoenix metro, offer services that do the heavy-lifting and tech-work for them, like data storage and self storage pickup and delivery.
Consider what makes you choose a particular gas station over another. Is it location? Convenience? Rewards points? Clean bathrooms? Delicious hot-and-ready breakfast burritos? Chances are it’s more than one of these things. For example, I go a half mile out of my way on the way home from the storEDGE office to fill up at the Hy-Vee gas station. Why? Because of those sweet, sweet fuel saver points I earn during my weekly grocery shopping. I’m loyal to Hy-Vee grocery because of their delicious take and bake pizzas, weekly deals, and the Midwestern nostalgia of growing up with the brand. Their marketing’s got me, hook, line, and sinker. Your storage business can capture business in a similar way by offering unique services and amenities with strategic marketing.
We see it all the time in self storage development news: a new facility offering a niche twist on self storage, like valet storage services or wine cellaring. Find a unique niche value-added services to your renters like premium storage for RVs and boats, a motor club for classic car storage renters, package drop-off and acceptance, state of the art security technology, business storage solutions (like fax machines, printers, wi-fi, and conference spaces), or in-home pickup and delivery of items (like the Uber for self storage model). But remember: the best idea is nothing without strategic marketing. You’ve got to get your unique amenities in front of your target audience’s eyeballs, and to do that, you’ll need the help of web marketing experts. Research your target audience heavily to know the ins and outs of their purchasing decisions. Then, you’ll be able to stand out from the crowd (with your unique amenities) and attract new renters (with your smart marketing efforts).
Investor and billionaire philanthropist Warren Buffett has often spoken about the importance of building an economic moat, in which a business develops a “moat” - a competitive advantage - that keeps competitors away and prevents business failure. So what’s your self storage business’s moat? What’s to stop another storage facility from opening up next door and taking all of your customers? To succeed in a competitive market, your storage business needs to have something that stands out, like award-winning customer service, a nostalgic community identity, a winning web presence, or a unique business model. Your competitive advantage is what makes renters stop their search and choose to rent from you, and it protects your business in dog-eat-dog business environment.
What makes your storage business different is your special sauce. In a city filled with traditional self storage, be the unique brand that offers climate controlled units and wine storage. If all of your competitors are trying to offer the lowest rate, don’t compete for the cheapest renter - do something different. Branch out and offer something that your competitors can’t, and you’ll build an impressive moat that brings in renters year-round and insulates your business from failure.
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