03 Oct 2023
During the recent SSA Fall Conference and Trade Show, we had the opportunity to engage with industry experts, gaining insights into the current self-storage landscape. Tommy Nguyen of StoragePug and James McLean discuss the impact of the Extra Space and Life Storage merger on the self-storage industry. They mention that the acquisition has led to a drop in rates and the average price per square foot from the highs of 2022. Tommy emphasizes the importance of strong fundamentals for smaller self-storage facilities to compete with larger REITs. He suggests investing in quality photography, having a user-friendly website for online rentals and payments, and optimizing their Google business profile to attract customers.
James: Tommy, thank you so much for your time today. It's been a great show. I'd love to chat with you about sort of the biggest industry news, which is the extra space, you know, collaborating and acquiring life storage. So with this acquisition, we're seeing a lot of the rates drop, the average price per square foot year over year has plummeted from the all time highs of 2022 to 2021. I think a lot of this is the REITs dropping, they're asking rates to drive occupancy. On the flip side of this, how can smaller franchises, smaller facilities kind of keep up with these bigger REITs that have such a strong war chest?
Tommy: Yeah, man, I think that's a really good question. I think anytime there's consolidation within an industry, you got to adapt, right? And I think what I heard, I just heard Joe, the CEO of you all, I just heard what he said was their strategy is to maintain what they're already doing. And I think some of the things they have going for them is they have good online presence, they have good service, they have good staff, right? So because they have those strong fundamentals, they're going to kind of weather through the storm and so they're not going to play the discount, lower rates game that maybe some of the other bigger guys are doing, right? So if you're a smaller operator, I think you take from Joe's playbook, it's like, hey, invest in a good website, have good online presence, have good staff, have good customer experience. Those strong fundamentals allow you to kind of weather this storm and not have to play this race to the bottom game. And I think, you know, again, with consolidation, we've seen this in multiple other industries. That's what happens is this kind of this race to the bottom and it's a chase for market share.
James: Yes.
Tommy: Right. And that's what Extra's doing. And that's fine. That's their prerogative. And they're going to do a good job at it. Right. But I think if you're a small operator, independent, whether you have one facility or a hundred facilities, strong fundamentals are going to allow you to weather this storm.
James: Great. Absolutely. So to that point, let's say you just got caught in a very bad time. You just opened up. You're still trying to lease up your low occupancy. What three fundamentals would you recommend or sort of put in no specific order to recommend for a facility like that?
Tommy: Yeah. First and foremost, and I think this is the most important, I will actually put in an order. First and foremost, strong photography. Self storage is still a very visual product. Most people who rent storage have never rented before. So photography and visuals and videos are actually going to help convince me that I want to store at your facility.
