Publication XVI

By Michael McCune
Argus Self Storage Sales Network

There are some clues that signal the market is about to be overbuilt. First there are more phone inquires that don't turn into showings, then you hear about cheaper rates at a nearby facility, and lastly you begin to notice that your month end report shows that your vacancy went up three percent. The good news is you don't have to worry now - because you are already cooked! This is not the time to worry or plan, that time has already past!

Obviously there are some things that you can do to meet the newly aggressive competition, but the objective of this article is to put you way ahead of the game and let you determine the future condition of your market before you feel the effects.

We recommend that you make an annual assessment of your facility's competitive position in the market place. Fortunately, this analysis not only tells you if there is overbuilding, but can also let you know when to raise rates or to expand your facility. We have never had an owner who actually did this simple investigation that didn't learn something in the process and was not glad that they had spent the few hours that it took to complete. Most of the time the news is positive and the owners find that they can be MORE aggressive rather than more cautious. If the analysis shows that there may be overbuilding in your general area you will have the time and options to consider, rather than just accepting your fate. The options can range from improving your property to refinancing, delaying expansion, or even considering selling.

Begin by viewing a working copy of the form shown on this page. This is the form that will make you face the truth and allow you to make the right comparisons. Click here to download the sample form and blank form for your evaluation.

You will first take this form to your local planning office and building department. They can tell you about any projects that are planned or for which building permits have been issued. Getting to know these folks can often be helpful because they can keep you informed, and it is always good to have a friend in city hall. If there are new facilities planned, get all the information you can and drive to the prospective sites and rate them as you would an existing facility.

Next on the agenda is to visit your nearest five or six competitors, generally about a five mile radius. It is best if you can talk to the managers and get a feeling for their rates and vacancies. However, if they aren't cooperative you can always shop them from your home phone and get information on rates (and concessions) and an idea of the vacancies. Evaluate each property, including your own, for visibility, access, signage, traffic count, quality of security, and general appearance on a scale of one to ten. Note on the form the rental rates for several different sizes of units and the vacancies that you found or estimated. Then add up the scores and your basic analysis will be complete. It will be clear from just looking at the numbers where you stand in relation to your market. If there are no new projects and the vacancies are low - raise the rates! On the other hand, if you find your rates are high, the vacancies are increasing, and there are two new projects about to start, look out. It is probably time to get the refinancing done, start a new paint job, get the gate fixed, enlarge the sign, and, if you are thinking of selling in the next year or two, it might be a good idea to accelerate that plan.

While overbuilding cannot be avoided, some of the sting of overbuilding can be! Remember that every customer is also a potential competitor!