22 May 2023
At last month's ISS World Expo, we enjoyed engaging with industry professionals regarding the dynamics of the self-storage industry. Among these was a conversation with Brett Copper of Copper Storage Management who shared valuable insight for smaller businesses operating without a vast financial reserve and what he thinks the future of the self-storage industry may look like.
James: Brett, thank you for your time today. We're seeing a lot of difficult macroeconomic conditions that's constricting the self-storage industry for brokers and people in development to get deals over the goal line. What is some advice you have for people who don't have a huge bank role, who don't have access to resources like the REITs to still add value to the facilities and or look for good deals? What do you have to say?
Brett: Yeah, of course. So the first would be cutting operational expenses. I mean, that's first and foremost, because if you think about it, there are so many op-ecs like having full-time managers, those kinds of things that right now, if interest rates are up, deals are a lot more thin, the margins a lot more thin, op-ecs is an easy thing to cut in a lot of cases. You know, obviously, always the ancillary income like tenant insurance, rate increases, doing these things are part of it. But if you can cut payroll by 50 grand a site, you know, you're at 700 grand in value added. As far as finding sites, it's kind of interesting because the traditional multi-story facilities, A-class facilities have been extremely difficult to find good deals because it's very expensive and interest rates go up a couple points. Those deals can go up by a million dollars, makes it not possible. But tertiary secondary market facilities are everything. There's 80% of the market are going to be these smaller deals, which are great for this market. You buy a site that's a million, $2 million, interest rates don't hurt that bad. And so you definitely have to use good services, though, to find those deals because market research is so important when you buy smaller deals, rates are lower. So you really have to do good research. But there are tons of good deals. I think we've probably closed on 10, 15 sites just the last couple of months as far as personally bought.
James: Well, congratulations on that transaction volume. That's great to hear. I think I agree completely with you saying that it looks like the primary markets are so highly competitive that people should look elsewhere to tertiary markets. What are your closing thoughts on the future of sell storage in the next 10 to 12 months? You think things are going to get ugly before they get better. What do you expect?
Brett: Sure. Well, I definitely think interest rates aren't going to get much better anytime soon, which is obviously going to hurt new development or expansions. But at the end of the day, I think people are going to invest in making their sites run better. They're probably going to get management companies or call centers. They're going to try and cut those expenses. And as long as we add value and cut expenses, it's always going to be healthy for us. Just do not overpay on these deals. That's really the key. And I think give it six, eight months. We're going to start seeing interest rates come back down and it'll become more healthy.
James: Brett, thank you so much for your time and enjoy the rest of your show.
