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Articles from 1999 In December


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Article-(Un)Altered State

(Un)Altered State

If I said that we'd witnessed dramatic changes in the self-storage industry over the past year, that owners and developers are fearful of a downturn, and that 2000 is clouded with uncertainty, would you believe me? Good. Don't. It isn't nearly the case, and besides, pessimism is not the most fruitful state of mind.

After speaking with many of this industry's experts, attempting to predict whether the generally prosperous climate of self-storage will continue throughout the upcoming year, what I've got is a lot of conservative responses--and rightly so. The industry that was so hard-hit at the beginning of the decade has evolved considerably--well-recognized now by Wall Street, commonplace among American households, accepted by businesses as a viable solution to dilemmas of space requirements. But as one insider put it, "I thought two years ago things couldn't get any better. But they have. The question now is, how long will it last?"

While it doesn't appear that participants in self-storage are waiting with baited breath for a shocking turn of events, they are cautious in their enthusiasm for future success. What trends and changes may occur in 2000? Refer to the "State of the Industry Report," to read what is foreseen by the experts in this field.

What is certain for the upcoming year is that you as an owner, operator or manager of self-storage, will be faced with many of the same issues that have plagued you in the past: providing optimum customer service, increasing your bottom line, maintaining awareness of legal pitfalls, etc. For example, how many of you have made pains to ensure your facility is compliant with the Americans with Disabilities Act? If you haven't, you should. It's certain to become a greater issue for businesses in upcoming years. Scott Zucker explains how the ADA relates specifically to self-storage. And William and Patti Feldman demonstrate the potential contribution of occupant-responsive lighting controls to the safety of your facility, as well as your bottom line. Think how that may tie in to your ADA requirements, also.

Finally, we hope to be seeing you all at the biggest tradeshow in the business next month, Feb. 2-4, at the Rio Suite Resort & Hotel in Las Vegas. Not only will you be made privy to the latest products and services in the industry, but you'll have access to some phenomenal education seminars and networking opportunities. We'd also like to announce that the Grand Ole Opry Hotel in Nashville, Tenn., will serve as our Eastern hub tradeshow location in 2000--a development we're extremely excited about. See  this issue for some tips on getting the most out of a tradeshow event, and don't forget to stop by our booth. We always look forward to meeting our readers and gathering feedback for future issues.

Best wishes for the new year,

Teri L. Lanza
Editor
[email protected]

Inside Self-Storage Magazine 01/2000: Ask The Waldmans

Article-Inside Self-Storage Magazine 01/2000: Ask The Waldmans

In Deep Trouble

DEAR WALDMANS: I manage a self-storage facility in Texas, and am fairly new at this job. I have been faced with a real dilemma concerning the rules for an auction. The company I work for does not provide us with a book of storage rules. We must ask our supervisor, but with mine, I feel like he makes up the rules as he goes along. We recently had an auction and I mailed certified letters to the tenants when he cut the locks. He placed the ads in the paper once. One of the tenants that had been sent a notice called and asked if he could bid on his own unit. I did not know the answer, so I asked my supervisor and was told he could not.

At the sale, everyone interested in bidding was given a form for each unit. When the forms were turned into the supervisor, he awarded the unit to the highest bidder. I was talking to a manager at another facility and asked him if this was the way an auction was supposed to be handled. He said he had a book of rules and guidelines that indicated the tenant can bid on his own unit. He also said the way we had handled the auction was not legal due to the fact that theirs were sealed bids and not opened to the public. After the sale, I had a telephone call from a tenant of one of the auctioned units. He told me he had looked over his rental agreement and could not find any stipulation that he was not allowed to bid on his own unit. I told him I had questioned my supervisor and that was what I was told.

I really like the storage business, but I'm feeling uneasy about doing something illegal. Please give me some information on conducting an auction.

--FRUSTRATED IN TEXAS

DEAR FRUSTRATED IN TEXAS: It is rewarding to see an employee who is concerned about the right and wrong way of doing things. First, it would be a great benefit if the facility had some rules in writing to follow. You may suggest to one of your supervisors that he check out our Web site for books on rules and procedures. The Texas Mini-Storage Association also offers a great deal of information.

It would benefit you and your fellow employees to research the rules and regulations on storage facilities in your state. Not all states are the same. Also, you may want to investigate and find out if the manager or someone above your supervisor does have a copy of your facility rules. I know this would have to be done very carefully, but, as you stated, you like the business, and I believe if you had someone to teach you the correct procedures, it would make you an excellent storage-facility employee or maybe a manager one day.

When a tenant's unit gets to the point of going to auction, there are many rules that must be followed--and exactly by the book. As to the amount received on each unit, if the bid is more than what is currently owed on the unit, the facility does not keep any amount over what is owed. Most states allow you to collect the costs of the sale. Any excess goes to the owner or the state if the owner can not be found, so you are correct in following your instinct to investigate this situation further. You will be faced with this same dilemma again and again. Auctions are just a normal part of the operation of a storage facility. The rules and regulations that storage facilities are under should be followed to the dot at all times. It only takes one unhappy tenant to file a lawsuit. When that happens, it creates tension, loss of time, work and extra work. Lawsuits are never a pleasure for either party and need to be prevented whenever possible. I wish you luck in the business.

A father-daughter team, the Waldmans are self-storage owners/operators and attorneys. In addition, Ms. Waldman holds a master's degree in labor and employment law from Georgetown University. The Waldmans are co-authors of the industry's leading series of books on self-storage operations: Getting Started, Forms, Policies & Procedures and South Carolina Tools. Another creation of Ask The Waldmans are their colorful posters designed exclusively for the self-storage industry. Comments and questions for ASK THE WALDMANS may be sent to: The Waldmans, P.O. Box 21416, Charleston, SC 29413.

E-mail: [email protected]; Web: www.askthewaldmans.com

Views and opinions on legal matters are those of the authors. Professional counsel should be obtained before any determination or positive action is taken.

Occupancy Sensors and LightingAdd convenience and security for tenants while brightening your bottom line

Article-Occupancy Sensors and LightingAdd convenience and security for tenants while brightening your bottom line

Occupancy Sensors and Lighting
Add convenience and security for tenants while brightening your bottom line

By William and Patti Feldman

While facility owners and managers have, for many years, had to grapple with the needless waste of keeping lighting in buildings turned on, even when areas and rooms are unoccupied, few have made the leap to install occupancy sensors in their facilities. Instead, they have woefully had to contend with the high utility bills that result from having lights working all day and night, or play policeman and remove tape, wedges or other jury-rigs that renters commonly use to override mechanical timers that are installed to control lighting.

Recognizing that occupant-responsive lighting controls resonate advantageously on the bottom line, Ron Urban, owner and manager of Electrical Concepts and Construction Inc., a New Jersey-based electrical-contracting firm that specializes in design/build work for the self-storage industry, suggested these devices to several clients as part of the electrical installation he performs for new construction projects. These devices automate on/off light switching to correspond to actual occupancy patterns throughout a building. Urban cites two benefits: First, facility owners/managers save money year round on energy costs; second, they simultaneously provide tenants with automated, safe, secure lighting throughout all parts of the facility.

In the six occupancy-sensor installations covering more than 600,000 square feet of self-storage space that Urban has performed to date, he installed state-of-the-art occupancy sensors from Leviton Manufacturing Co. of Little Neck, N.Y. These were typically installed in place of manual timers. "No one likes being left in the dark," notes Urban. "Occupancy sensors that reliably jump-start lighting in the nick of time are a great way to avoid the potential hazard of someone entering a darkened area and having to grope for a light switch.

"The renter doesn't have to juggle bundles or put down bulky items to turn on a switch," Urban points out. "And without any action on the part of the renter, the device saves energy by turning lighting off after a specified period, once movement is no longer detected in the area."

Two Technologies

The intent of occupancy sensors is to monitor an area or room for human presence and turn lights on automatically when the area is occupied and off once the person has left. There are two types of sensor technologies: passive infrared (PIR), which requires an unobstructed view of the occupant, and ultrasonic (US), which relies on frequency changes. Both are effective control solutions in locations with infrequent occupancy such as offices, storage areas, utility closets or restrooms. Technical preference of one sensor over another depends upon room layout and environmental factors, such as what type of equipment, obstructions, or heating and cooling devices are present.

PIR sensors react to the movement of a human body as a heat-emitting source in a direct line of sight or "field of view" and would be a good match for an entryway, hallway, office or open space; however, they may not work well in a space such as a restroom, where the sensor's field of view could be obstructed by a stall or partition. In this instance, an ultasonic sensor might be the better choice, since it does not depend on a direct line of sight.

Ultrasonic sensors continually generate high-frequency sound waves beyond the capacity of human hearing, in the 25kHz to 40 kHz range, which means they that bounce off everything in their range. These sensors monitor changes in the return time of the reflected sound waves, and turn lights on when they sense a change in frequency. Because they can detect motion behind fixed objects in a room, they are suited to enclosed areas and are a versatile choice for installation throughout a storage facility.

Significant Energy-Savings

In storage facilities, where space is occupied by people only sporadically, annual electrical savings for lighting usage can quickly supercede the cost of the sensors. (EPA figures indicate that first cost makes up only about 8 percent to 9 percent of the whole cycle cost of a lighting system, with maintenance responsible for about 1 percent to 2 percent and energy consumption responsible for the remaining 90 percent.) Furthermore, occupancy sensors have been shown to extend usable lamp life and the time between lamp replacement, minimizing maintenance costs. In addition, air-conditioning costs are also lowered because less heat is generated from lamps and ballasts that are turned off when they don't need to be on.

Benefits of Using Sensors

Urban says he typically installs the sensors in indoor, multi-floor facilities, using as many as 30 to 50 devices throughout a facility. "Automated lighting control enables users of the self-storage facilities to have their hands free while unloading or loading their equipment, cartons, files and furniture," he says. "We have determined that occupancy sensors are a valuable asset to the owners because the lights are on only when they need to be.

"A secondary benefit of occupancy sensors is that renters were taping up timer switches to keep them on so that they didn't run the risk of having the lights in the hallway go out while they were inside the building. The occupancy sensors, which go on immediately, eliminate the potential hazard of someone getting hurt in a darkened area while looking for a light switch."

Today, the use of sensors is becoming increasingly popular in self-storage facilities. "From my experience, I see that all the big players are installing them. We are incorporating the occupancy sensors into our design and having tremendous results with our customers, who are very happy," Urban says.

Occupancy sensors also work well in both new construction and in retrofit projects. In fact, savings may be biggest for owners of self-storage facilities that were converted for that purpose. Typically, owners of converted facilities will leave the lighting fixtures in place or move them around, but they leave the lights on all of the time. If the ceilings in the hallways are higher than those typically found in a building constructed for self-storage, and the fixtures and lamps are not energy efficient, that much more lighting will necessarily be used. All that lighting remaining on for intermittent visits translates into a lot of wasted energy consumption. A retrofit with occupancy sensors can save owners a bundle on energy expenditures, while helping to avoid the possibility of a personal-injury judgment resulting from the hazards of poor lighting.

William and Patti Feldman write for magazines, newspapers and corporations on industry-related trends and products. They can be reached at [email protected], or call (914) 238-6272.

Leviton Manufacting Co. is a privately-held manufacturer of wiring devices switches and receptacles, lighting controls, surge- protective devices, personnel-protection products, voice/data products and a wide range of connection products.

Self-Storage and the ADAAccessibility for the disabled under the Americans with Disabilities Act

Article-Self-Storage and the ADAAccessibility for the disabled under the Americans with Disabilities Act

Self-Storage and the ADA
Accessibility for the disabled under the Americans with Disabilities Act

By Scott Zucker

Title III of the Americans with Disabilities Act (ADA) of 1990 prohibits private entities from discriminating against individuals with disabilities by maintaining places of business that are not physically accessible. The act requires that places of public accommodation remove architectural barriers that limit access to or use of the public place.

The term "public accommodation" in the ADA generally encompasses all private businesses that offer goods and services to the public. Existing buildings, alterations and new construction are all within the scope of the ADA's public-accommodation provisions. As such, under the law, existing buildings were required to remove physical barriers to entering and using the buildings, and alterations to buildings were required to be "readily accessible to and usable by" people with disabilities to the "maximum extent feasible." All new construction of commercial facilities must be in compliance with the ADA and must be readily accessible to and usable by individuals with disabilities. The accessibility obligations for new construction are greater than those applicable to alterations of existing facilities.

Following the enactment of the Americans with Disabilities Act in 1990, and to affect the act's prohibition against discrimination based upon disability, an agency was created by the federal government to oversee the design, construction and alteration of buildings and facilities covered by the ADA, and to develop implementing regulations. This agency is the U.S. Architectural and Transportation Barriers Compliance Board (U.S. Access Board) and has regulatory authority to issue its "Americans with Disabilities Act Accessibility Guidelines" (ADAAG), which provides the technical requirements for compliance with the ADA.

The first versions of the ADAAG did not address self-storage facilities at all. In 1996, the ADAAG Review Advisory Committee issued a "recommendation" report to the U.S. Access Board which included a "scoping" provision related to self-storage construction. This type of scoping provision, which, in this case, set a minimum number of spaces in facilities to be accessible for disabled individuals, had previously been used with other businesses, such as hotels, and had set a requirement for the number of rooms which were to be fully accessible. Section 225 of the 1996 ADAAG recommendations called for "scoping" of accessible self storage units as follows:

The proposed rule went on to state that "Accessible, individual, self-service storage spaces shall be dispersed throughout the various classes of spaces provided. Where more classes of spaces are provided than the number of required accessible spaces, the number of accessible spaces shall not be required to exceed that required by (the recommendation). Accessible spaces shall be permitted to be dispersed in a single building of a multibuilding facility." This recommendation concerning self-storage was never included in the updated ADAAG; however, it has never been rejected. The recommendation remains simply in limbo within the federal rulemaking process.

Certainly, the construction of certain aspects of a self-storage facility are clearly explained in the ADAAG. For example, the requirements for offices built for self-storage facilities, just like any office area, can be found within the ADA regulations. Such offices must meet the requirements for public accommodations and be fully accessible to the disabled through the use of ramped walkways and appropriate sized doors. Similarly, access into self-storage buildings themselves can be provided through the use of certain doors and by using expanded hallway widths. Many of these issues are easily tackled, since there is a need in self-storage facilities to allow for easy access for customers who are moving their property with dollies or carts. For the same reason, the requirement for elevators in certain buildings under the ADA not only assists disabled patrons, but is a necessity for customers moving property in multistory facilities.

It is the issue of access into the storage units themselves that remains the most confusing aspect of facility construction under the ADA. Without clarity on this issue, architects are left with little guidance as to the appropriate percentage of facility units, if any, which must be built for disabled access in new facilities and how those units are to be built.

For example, where in common self-storage construction a slope is built into the grading to allow for water run off away from a building, the ADAAG rules would appear to require that there be no ramp or slope at least 5 feet from each unit door or public entrance. If that is the case, there would be no ability for designers to create the necessary grading slope away from the building. Additionally, where most concrete pads in facility construction include a small lip or curb in the doorway as another method to restrict water infiltration into storage spaces, this lip would also be in violation of the ADA, which does not allow for any obstacles to access.

It is interesting to note that, although the guidelines seem to create certain restrictions for self-storage development, as a practical matter there remains the question whether the ADAAG can be applied to self-storage at all. For example, "loading entrances" are not included within the definition of "public entrances" under ADAAG and, whereas the ADAAG does discuss doors, there is no discussion whatsoever about the type of roll-up doors typically used in self-storage facilities.

The lack of specific information on an issue, such as what doors must be used for self-storage spaces can be used by owners and architects to argue that they do not have to meet the general criteria for doors mentioned in ADAAG. On the other hand, this lack of information can also lead to interpretations that suggest special doors must be used, since standard roll-up doors may be considered too heavy to lift. Without clarity on these points, there will only be continued controversy and confusion between architects and local code officials.

City planners eager to follow the ADA rules have been forced to impose their own interpretations of the ADA and have, in certain circumstances, over applied the rules so as to avoid the risk of claims from disabled patrons or from the Department of Justice, which enforces the ADA. Some local officials have sought 100 percent accessibility compliance for self-storage units. However, the practical application of such interpretations is devastating to self-storage developers who look at the costs of using special types of doors or even electric door openers for each of their units rather then conventional roll-up doors. Such alternatives, outside the mainstream of typical design for self-storage facilities, can substantially raise construction costs.

The ADA is not a building code, and Title III of the Act does not have any direct effect on state and local building codes. The ADA allows the U.S. Attorney General to certify that a state law, local building code or similar ordinance that establishes accessibility requirements meets or exceeds the minimum accessibility requirements for public accommodations in commercial facilities. Because the ADA is a Civil Rights law, a few states have adopted ADAAG as their accessibility code and implemented its provisions through state and local building officials. However, ADAAG compliance does not relieve architects from complying with local access codes. Where such local codes contain more stringent requirements, they must be followed.

Total Spaces in Facility Minimum Number of Required Accessible Spaces
One to 200 5 percent, but not less than one
201 and over 10, plus 2 percent of total number of units over 200

Obviously, the rules governing public access for the disabled are important for commercial businesses to follow. However, the lack of specific direction for some businesses, such as with self-storage, can result in costly delays and overall confusion for all parties involved in the design and construction process. Until the federal law identifies specific requirements for self-storage facilities, project owners, their architects and city planners need to work together to match the need for appropriate access for disabled patrons without making the cost of construction unworkable for facility owners and creating requirements that change the business of self-service storage.

Scott I. Zucker is a partner in the law firm of Weissmann & Zucker, P.C. Mr. Zucker is an expert in the field of self-storage law and represents self-storage owners and managers throughout the country in matters that include contracting for construction, preparing lease agreements, defending tenant claims and handling employment disputes. He can be reached at (404) 364-4626 or by e-mail at [email protected].

HELP WANTEDMr. or Ms. 'Good Manager' only need apply

Article-HELP WANTEDMr. or Ms. 'Good Manager' only need apply

HELP WANTED
Mr. or Ms. 'Good Manager' only need apply

By Pamela Alton

As we all know, the people you choose to manage your facility will make the difference between a highly successful operation and a mediocre one. Finding that perfect management staff is not always an easy task to accomplish. Where do you find them and what do you do with them once you have them?

To find management, you can place an ad in your local newspaper or trade magazine, or use one of the placement services available today. Getting people to respond may be the easiest aspect of your search--interviewing and matching the right manager to your facility is not so simple. Everyone can be on their best behavior for an hour. That's why it's important to interview your selection of candidates more than once. If they are currently employed at a facility close enough for you to visit, you should consider doing so--providing you get their approval. Most managers seek new employment confidentially and don't want to jeopardize their current position.

When interviewing candidates, consider their individual talents and match the management personality with that of the position you are trying to fill. Traditionally, if you have on-site housing, most full-time resident staff consists of a husband and wife team. And just because you may think the woman is the one behind the desk and the man is the one responsible for the maintenance, does not mean that she will be better at the office work or that he will be a better cleaner. Sometimes she will handle the maintenance, and he is better with the computer. Perhaps he is more outgoing and would be better at outside marketing. Again, look at the talents of each manager and assign the job responsibilities that are best suited to each.

Once you have selected your management staff, you should give them an orientation. this is the time to discuss company policy and procedures, have them sign their letter of employment and apartment lease. If you don't have a clear and concise policy and procedures manual, you need to design or purchase one (or several) and customize it to suit your company philosophy. Go over the manual with the manager. Discuss job duties and responsibilities, chain of command, etc. Make sure you are both on the same page, so to speak.

The next stop is training. If you hire an experienced management staff, your time training may be shorter than with inexperienced staff. If they are novices, you will need to spend a minimum of 10 days training them. Training must consist of telephone techniques, showing units, maintenance of the facility, outside sales and marketing, company forms, computer programs, collections and lien sales, etc.

As the owner or management company, it is imperative that you give your management staff the tools to do their job effectively. Those tools consist of effective training, maintenance supplies to keep the facility clean, an organized office atmosphere and clean, contemporary living quarters. If you would not allow your mother, wife, child or yourself to live in the on-site housing, how can you expect the management staff responsible for your mulitmillion-dollar investment to?

Open communication is another important element of successful staffing. You and your management staff must feel that you can discuss any positive or negative aspect of the job. One of the ways to accomplish this is by having your management staff call in the daily deposits to your office. This will give you the chance to discuss any daily issues, such as marketing programs, maintenance in progress, problem tenants, etc., without making the manager feel he is being "micro-managed," that he doesn't have the authority to make day-to-day, on-site decisions.

Define your expectations. Most people are not mind readers. If you are not happy with their job performance, tell them what you expect. Visit your facility regularly. Conduct audits and inspections. Ask for the manager's input in designing marketing or maintenance programs, annual budgets, rate increases, etc. Give your managers the control needed to actually manage the facility. You hired and trained them--now, let them manage the site. If you don't trust their judgment, then you made the wrong choice in hiring. If so, then do yourself and them a favor: End their employment and allow them to find a position suited for them, and you the right candidate for your facility.

Paying your management staff a competitive wage and designing an attainable bonus program is a must. Regardless of what ABC Storage down the road is paying its management, you should look at the managers' experience, track record, enthusiasm and ability to operate your investment, and pay them accordingly. There is no right or wrong bonus program, and not all bonus programs should be the same for all facilities. Facilities are as individual as people are. What will motivate one manager will not always motivate another.

Take your time to discuss with your managers a bonus structure that will achieve the desired results. You want to write big bonus checks each month because, if you do, you are realizing record incomes at your facility. Don't forget a pat on the back and a compliment for the manager. It doesn't cost a dime, but it's worth a fortune.

You don't have to be a genius or own a crystal ball to have a successful facility. It just takes some basic philosophies. Match your management staff and their talents with the facility. Define clear-cut company policy and procedures, facility manuals, orientation and training. Communicate with your management staff and visit the site on a regular basis. Provide the tools to effectively do the job. Design a competitive wage and attainable bonus program. Reward your manager for a job well done. Provide decent housing (if any). With these few basic, commonsense rules, you and your management staff will reap the rewards of a successful self-storage operation.

Pamela Alton is the owner of Mini-Management®, a nationwide manager-placement service. Mini-Management also offers full-service and "operations-only" facility management, training manuals, inspections and audits, feasibility studies, consulting and training seminars. For more information, call (800) 646-4648.

Working ItGetting the most out of a tradeshow

Article-Working ItGetting the most out of a tradeshow

Working It
Getting the most out of a tradeshow

Editor's Note: The following article has been provided as primer for those attending the Inside Self-Storage Expo to be held at the Rio Suite Resort & Casino in Las Vegas, Feb. 2-4.

Some people view it as a vacation. Others think of it as an information-gathering expedition. Then there are those who approach it as an opportunity to network with their professional peers. But however you look at it, attending a tradeshow or conference takes planning and coordination. There are airline and hotel reservations to be made, rental cars to consider--not to mention making sure the office is sound enough to be left unattended. But the serious business takes place after stepping foot on the show floor. The following information can help you make the most of the experience.

An Organized Plan of Attack

If the budget affords sending some of your employees to an industry tradeshow, advanced planning is key. As an attendee, don't head out to a show without a plan of attack to maximize your time. First, collect the following items:

  • A sturdy notebook, preferably with a pocket folder to hold handout material
  • A copy of the vendor list and seminar schedule
  • A daily calendar on which to mark your personal schedule
  • A stack of your business cards to hand out
  • A comfortable pair of shoes
  • A list of questions to have answered or information you'd like to gather.

Seminars

When the show information arrives, take a look at the seminars being offered. Use them as an opportunity to either update your training or initiate any new staff who might be attending the show. You'd be amazed at the variety, so select carefully. If there are some that cannot be missed, be sure to pencil them into your calendar. Times where the particular topics do not interest or apply to you can be used to review notes, browse the show floor, make phone calls, etc.

Don't feel bashful about exiting a seminar if it becomes obvious that it won't be of use to you--most conference speakers expect some disruption. Sit in and take notes on one or several seminars, and be sure to obtain the handout materials if a full workbook isn't provided by the sponsoring organization.

If you miss a seminar or won't be able to attend, you may have another resource: Some organizations retain a professional to tape-record the sessions and provide copies to attendees at a reasonable fee. Oftentimes, those speaking at tradeshows are also exhibitors as well. This will provide you an additional opportunity to ask questions or set up an appointment or correspondence. A speaker may also present more than once, so be sure to check the schedule.

Don't overlook roundtable discussions. These are your opportunity, not only to speak one-on-one with speakers and experts, but with your industry colleagues as well. Information at these sessions tends to be more specific, and those sitting in on the discussions will all offer their own expertise or experience. These make fantastic networking opportunities.

Rubbing Elbows

Tradeshows and conferences offer a unique and excellent opportunity for networking with both vendors and other facility owners/managers. Even if official social functions are not planned, expect to mingle and make contacts. Some of the best information at a conference is gleaned from the experiences of other attendees.

Find out if any of your business or personal acquaintances are attending the show. Make plans to meet for breakfast or lunch. Check the show agenda for pre-planned cocktail receptions, as well as hospitality suites and individual vendor events. These are all perfect opportunities to network, make new friends, meet new business contacts and quiz vendors in a more relaxed setting. Vendors are working at all times, so ask them questions whenever possible. They may be more relaxed at dinner and more open to discussion, but remember: Save the price haggling for later.

The Tradeshow Floor--Going It Alone

Before leaving the show, take a look at the vendors who will be exhibiting. Are there any who absolutely must be visited? Mark them on your calendar and, if time permits, contact them before the show and schedule an appointment with a sales representative. This way, time is not wasted at the booth, and personal time with the company is ensured.

Once at the show, make use of time efficiently by making two rounds of the floor. First, walk the aisles and get familiar with the vendors and their locations. Carry your notebook and a pen, and make references to those products that beg further investigation. Get acquainted with the whereabouts of vendors with whom you have pre-arranged meetings. And keep an open eye for exhibitors who may not have been on your list.

Now sit and rest. Depending upon the size of the show, this first sweep could have taken quite a while. Those comfortable shoes are coming in handy right about now. Get something to drink or grab lunch. Take a look over your notes--what questions do you have for your vendors? What information do you need about their products? Take a few moments to write these down. While in the booth, surrounded by other attendees vying for the representative's attention, it's easy to loose your train of thought.

Now return to the show floor for your second pass. If time permits, break this up into two days. Refer to your "hit list." Ask questions, take notes, and obtain brochures, literature and business cards to look over at a later time. Keep an open mind--while these people are at the show to sell, they're also there to help make your business successful.

The Team Approach

More and more companies are taking the team approach to tradeshows. This affords a more thorough approach to both the seminars and the exhibition hall. With a team of two or more attendees, planning may play a more important role. Each person will need a notebook, day planner and conference schedule.

Before attending seminars, decide who will sit in each one and what information is being sought. In a pre-show meeting, discuss what questions should be asked. Create a list. This approach will allow more leisurely notetaking and less seminar hopping.

The pre-show meeting should also address who will visit which vendors. This way, more time can be spent at each booth. Information from each of your attendees can be shared after the show. Make sure that those talking with specific vendors are familiar enough with the product or service to ask intelligent questions, whether they be about locks, buildings, doors, etc. This makes the decision-making process easier in the long run.

The Final Touch

Now that you--and possibly your team members--have spoken to vendors, networked with peers and attended seminars, you may think the show is over. Not so fast. If the booths are still open, take this final opportunity to get questions answered in person. Look over the material you've collected and your notes. Is there anything missing? Any information or product you'd like to investigate further? Now is your chance.

When the show is over, the coordination of materials comes into play. A post-show meeting is essential. Share contacts and information with other members of your office or tradeshow team. Follow up on any correspondence you might have arranged at the show, send out thank-you notes and tie up any loose ends.

Finally, a tradeshow or conference may be 90 percent business, but don't neglect to have any fun. Attend outings or events planned by the show sponsor or vendors. Take advantage of these opportunities to create long-lasting contacts in the industry. It will make the trip more memorable, and will make future shows something to look forward to.

Now Is the Time for Records Management

Article-Now Is the Time for Records Management

Now Is the Time for Records Management

By Cary McGovern

There has never been a more opportune time to go into the records-management business. The year 2000 marks the merger of the two industry giants Iron Mountain and Pierce Leahy. This merger will open the door for local entrepreneurs to establish themselves in important niche markets.

Iron Mountain Inc. Buys Pierce Leahy Corp.

KING OF PRUSSIA, Pa. (Reuters)--Iron Mountain Inc. plans to buy Pierce Leahy Corp. in a $1.2 billion stock deal, Pierce Leahy said Oct. 21, combining the two largest records-management companies in North America. (To see the full story, access abcnews.go.com/wire/Business/ reuters19991021_1552.html.)

Why is this announcement so important? The records-management market has been in consolidation for the last several years. Both Pierce Leahy and Iron Mountain have bought the market leaders in each major market. Although the giants have a stranglehold on the high end of the market, industry observers believe that this consolidation has opened new market access for the local entrepreneur.

Three Market Perspectives

Major Markets. The major records-management markets around North America are generally cities larger than 1 million to 1.5 million people. The newly combined company, Iron Mountain Records Management, will have locations in more than 70 markets of this size, mostly in the United States and Canada. Although Iron Mountain has the size and capability to perform virtually any records-management function, its focus continues to be on the very largest accounts in each market.

It has been our experience that local and regional companies prefer to deal with local companies. The local entrepreneur has the advantage over the large company in customer service and flexibility. The key for successfully competing with Iron Mountain in these major markets is service. Many of my customers who go head-to-head in competition are very successful; their most important components are accessibility to management and personal service. If the customer wants something special, he can speak with the owner. Try that with Iron Mountain.

If you are a new start-up or entrepreneurial operator in one of the major markets, this may be the catalyst that you need to build your business. Although the buyout of Pierce Leahy will take place in early 2000, it will likely require two to three years for Iron Mountain to fully integrate the two operations. Based on the many mergers that have taken place over the last few years, you can count on there being operating difficulties and a management shuffle from the top down in each location. If you want to build your business, the time is definitely now.

Growth markets. Markets smaller than 1 million in population are considered the best markets for the development of new commercial records businesses. Generally, communities from 200,000 to 1 million have not yet attracted the major competitors. However, these cities seem to have the highest percentage of potential new records-storage business. It is likely that less than 50 percent of the existing marketshare has already been captured by all of the local competitors. In addition, existing records-storage companies in growth markets typically do not offer a full line of records- management services. It is likely that communities of this size have two or three competitors that grew up out of general warehousing, moving-and-storage or the self-storage industry.

If you are in a growth market of less than 1 million, you are in the hottest area for growth in records management. This market will surely be the next wave for acquisition. The market leader will be the most sought after by Iron Mountain or any acquirer. It looks like you will have three to five years to build up your business and become the marketshare leader. Remember, the more professional your operation and the more services that you provide, the more valuable you will be.

Micro Markets. Markets of less than 200,000 are developing the largest number of new start-ups. I get calls and e-mails on a weekly basis from entrepreneurs in small communities all across America. They want to know if it is possible to start up and be profitable in a small community. Recently, I have worked with start-ups in communities as small as 50,000 in population. The population size and the number of businesses in your community always drive your volume. If you are in a micro market, you can be successful and make a significant return on your investment. One advantage that you will have is the prices and margins are generally higher in a smaller community.

Market-Size Formula

Several months ago, I described in another article the formula for determining market size. It is worth repeating. Although this formula is not perfect, you can use it with some confidence as a benchmark for your community.

First, draw a circle around your market area, usually 25 to 50 miles for commercial records centers. Then calculate the total population in that market area. Multiply the population by five. That calculation yields the number of boxes in your community. Boxes are an average of 1.5 cubic feet (letter/legal are 1.2 cubic feet, letter transfer cases are 1.6 cubic feet and the legal transfer case is 2.4 cubic feet). Multiply the number of boxes by 1.5 to calculate the number of cubic feet available. Generally, the amount of boxes captured by commercial records centers is less than 50 percent of the total (smaller communities may be as high as 60 percent or more).

Example:

80,000 people in a 50-mile radius
x5 boxes per person
---------
400,000 boxes in that community
x1.5 cubic feet per box
----------
600,000 cubic feet total
÷2
-----------
300,000 cubic feet available

Determining Gross Revenue Potential

In a community of 80,000 to 100,000 people, it is likely that you can acquire 50,000 cubic feet of storage in two years and 100,000 cubic feet in the first five years of operation with an aggressive marketing plan. Let's use 100,000 cubic feet as a benchmark for determining the potential revenue:

100,000 cubic feet
x.25 average cubic foot storage rate per month
-------------
$ 25,000 monthly storage revenue
x1.65 service revenue is a minimum of sixty-five cents per storage dollar
-------------
$ 41,250 monthly storage and retrieval revenue

These estimates are general in nature, but are formulated from actual industry information. It is important to remember that the more services you provide, the more your service revenue will expand. Each 100,000 cubic feet of stored records can generate $500,000 in gross revenue.

Consider Records Management Now

If you haven't considered records management as a business, now is a great time to do so. You can access more than 25 articles and other information concerning tools and resources for records center start-up on the FileMan Records Management Website at www.fileman.com. 

Regular columnist Cary F. McGovern is a certified records manager and owner of File Managers Inc., a records-management consulting firm that also provides outsourcing services, file-room management and litigation support services for the legal industry. For more information about records management, contact Mr. McGovern at File Managers Inc., P.O. Box 1178, Abita Springs, LA 70420; phone (504) 871-0092; fax (504) 893-1751; e-mail: [email protected]; www.fileman.com.

The Riddle of 'Location'

Article-The Riddle of 'Location'

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The Riddle of 'Location'

By Harley Rolfe

The buzz these days is playing Q & A--you give the answer, then guess the question. Ready? Here's the answer: Location, location, location.

I know, you've heard that one, but an old adage applies here: "You have to ask the right question to get the right answer." What's the right question? "What is a good location for a self-storage facility, and will it stay 'good' for the useful life of the facility?" What other dimensions of location might there be?

If things are going well, it's probably because of the location. If things aren't going well, it may be for the same reason. Operators tout that their success is due to a unique feature of their facility. They certify that it will be hard to duplicate, offer rationale about why the site works and believe that, in all the talk of competition, location will carry the day. Let's take a closer look.

The Whole Truth

Self-Storage is a retail operation, so the most common location idiom for that business is a high-traffic retail-style model. Why do so many off-the-beaten-path facilities do so well? That's a riddle. Maybe the retail model isn't totally right for self-storage. Marketers are always trying to unravel their markets, then form and prove theories or insights on why they are behaving in certain ways. That's how you discover niches.

The usual retail-store prospect's interest centers on the goodies at the store. The goods are the focus of the prospect's activity--the self-storage locker is not. The tenant interest in the unit is passive. The only thing that happens for the user is that time passes while other things occur. Thus, the acceptability of a/the location relates to the other location, the one where the contents are destined (or perhaps where they originated). That other location controls the value for any given self-storage site.

Different Strokes

OK, so where is the "good" location, then? It varies with the segment. For the lawyer, the "good" location is that nearest to his office; for the person moving to a new residence, either the present or the new location; for the distributor, either the most convenient location to the interstate or the center of the distribution routes; for a contractor, close to his job site, etc. I'm emphasizing the significance of segments because the answer to what each tenant values is wrapped up in what he's up to, i.e., his use, business, problem....

How can an out-of-the-way location be a good thing? Security is an ever-present element choosing a facility. We install surveillance cameras, imposing fences, coded gates, on-site managers--all aimed at giving signs of our concern for tenant-property safety. High-visibility locations have a security flaw. They facilitate vandals committing their drive-by crime. Locations on side or dead-end streets, however... Well, out of sight, out of mind. So, it is certainly possible for a by-way location to do the job.

Keep in mind that a good retail location is actually a form of media that announces the facility to the thousands of passersby. A by-way location must be promoted, along with reminders of its virtues. That gives you a chance to use one of the most effective sales approaches--featuring an apparent sales weakness. Sound strange? It's daring, but it works like a charm. It dumfounds your competition (who believe that a highway is the only way) and instantly disarms what is "bad" about your facility by aggressively showing the positives of a by-way location.

Magic?

There is one self-storage development out there that makes the significance of location disappear. Magic? No. Containers. Location is important because the tenant must travel to the storage site. What if he never needs to go there? For those segments where the use of containers will work (residential moves, for instance) the storage location site is of little consequence. The client doesn't know or care as long as it's safe and the goods reappear at the destination on time. This extends the useful range of the facility from a couple of miles to whatever distance is practical for trucks to deliver containers. This is one to watch.

For the Ages

Another condition of the location picture is the effect of time. Your facility will be physically fit for 25 to 30 years. The passage of time can assail assumptions that pertained initially. Where the facility once served a bedroom community, now development changes it to commercial or even industrial environment. Yellow Pages content must be revamped, other messages and media need re-direction--all because the changing character of the area has recast the mix of uses that a location should serve. On-going surveys of the types of applications to which the facility is being applied will reveal these shifts and trigger management to take note of evolution. It is no fun to see the income being threatened for a facility in good physical condition because management is oblivious to shifts in the neighborhood.

One day an operator will want to sell. Appraisers accord location a lot of weight. Abstract evaluations of facility value (traffic counts, capped income, highest and best use, comparable sales, etc.) may work for banks and financial people, but these methods are backward looking. A facility buyer only looks to the future and must believe that he will be able to sustain and improve net-operating income. He uses any unknowns to discount a facility price. The fewer the unknowns, the less basis for haggling. It will help if the current owner has methods in place that show how he determines and regularly calibrates his location to the evolving character of the market.

Take Me to Your Leader

So far, we've been talking about the location of the facility. We need to be curious about the location of the decision-maker, also. That's the most important person in the marketer's life. He may or may not be located in the usual service area. My experience indicates that personal segment decisions get made locally, while those juicy commercial ones happen all over the place. This is especially telling in larger communities. Media choices are controlled by the location of decision-makers. Thus, we need to see where they call home.

Do an examination of your tenant addresses as they appear on the lease. Inexpensive computer programs can do that. You input the addresses of tenants, which then pop up graphically as dots on an area map. Separate them by segment, then inquire of the various tenant groups the use to which they are putting the unit. Once you know how your location works for each segment, you can compose a trenchant message to each kind of user. Existing facilities have a big advantage in that myriad decision-makers--past and present--have already made their evaluation and are telling you (by their presence) that your location works.

Location is the one thing the operator can never change. But he can adjust the way he presents his site to the emerging activity around him. He needs also to be conscious of the chance that those decision-makers he needs to reach are not located in his service area.

Missed some previous issues? Check the Web site at www.hardnosed.com, which has been modified to include a search engine. It permits you to locate an expanded discussion of certain terms or concepts as they appeared in the original nine-part series.

Harley Rolfe is a semi-retired marketing specialist whose career included executive-level marketing positions with General Electric and AT&T. He also owned lodging and office facilities for more than 20 years. Mr. Rolfe holds a bachelor's degree in economics from Wabash College and a master's degree in business administration from the University of Indiana. He can be reached at his home in Nampa, Idaho, at (208) 463-9039. Further information can also be found in Mr. Harley's book Hard-Nosed Marketing for Self-Storage.

State of the Industry ReportA look into the year 2000

Article-State of the Industry ReportA look into the year 2000

State of the Industry Report
A look into the year 2000

By Teri L. Lanza

"I never think of the future. It comes soon enough." ~Albert Einstein

That it does.

A year ago, Inside Self-Storage conferred with industry experts--crooned to the crystal ball, so to speak--in an attempt to catch a glimpse of the year ahead. Well, that year is complete, and here we are chasing insights, not only for the upcoming year, but for a whole new era. Now that we're barely recovering from another prosperous and promising spell, the question sitting on everyone's lips is, "How long can it all last?" Do the next 12 months indicate a strict diet of "more of the same," or will the dreaded downturn at long last be evidenced?

It isn't about stark metal buildings anymore, and everyone knows this. It's no great surprise that "storage" has made it's way onto more and more households' and business' monthly list of expenditures. What is surprising, according to industry gurus, is that good fortune has come to roost for as long as it has, and so uncompromisingly. What began as a difficult and uncertain decade has evolved into an epoch of unfettered growth for developers, owners and vendors alike.

Here, we'll examine the current state of the industry and where some of its more seasoned insiders believe it to be headed in 2000. Consider it your opportunity to look behind the curtain. The future may arrive soon enough, but there's certainly no harm in anticipation.

Let's Recap

The state of self-storage now as opposed to 10 years ago is a world of difference, and gratefully so. "The dramatic changes we've seen are in how the industry has grown up," says Maurice Pogoda of Farmington Hills, Mich.-based The Pogoda Companies. "The big things that have happened have been in the real-estate cycle. In the early '90s, things were just plain awful, due to the Savings & Loan crisis and the credit crunch. There was an overabundance of storage space, and buildings just weren't filling."

By the mid-'90s, things had begun to improve, with occupancies rising and owners being able to raise rents. There was also a resurgence of capital at this time. "The development that had been entirely stifled in the early '90s went into high gear," says Phoenix-based CB Richard Ellis' Kent Greenwald. "It started out a bit slowly, but by the time we got to '95 or '96, the REITS were also on their spending sprees, which made for a very active market." Rates began to skyrocket, occupancies were high, and the real-estate investment trusts were offering outrageous prices to buy properties--prices that, as Pogoda points out, were not sustainable by anyone but a REIT with its lower cost of capital and desire to build marketshare.

There was another element entering the mix at this point as well: A tremendous number of developers who had been damaged in the Savings & Loan crisis and had never built self-storage before stumbled into what they discovered to be a very easy industry to enter. "Self-storage was much easier than constructing the office building or complete shopping center that they might have built before," Greenwald explains. Development began to boom.

No Time Like the Present

Since then, development has remained steady throughout the country, to the point where overbuilding has become an issue in several areas. There are still some hot markets, however, primarily in major metropolitan areas with dense populations, areas such as Washington, D.C., Los Angeles, San Jose and San Francisco, Calif., according to Greenwald.

Dean Keller of Bancap Self Storage Group in Rancho Santa Margarita, Calif., agrees, although he, too, acknowledges the impending possibility of saturation. "Right now there are more buyers in this industry than ever before and, unfortunately, at least out on the West Coast, there aren't as many sellers as we'd like to see," he says. "Everybody in the business is doing better than they've ever done before, so unless there's some unique circumstance, they have no motivation to sell."

That doesn't mean there isn't danger ahead. In a market like San Jose, where there were 4 million square feet of storage space, everyone was full and had waiting lists. It was one of the strongest markets in the country, according to Keller. But now, with another 2 million square feet of space either constructed or in the pipeline, everyone's getting a tad nervous. "Some of the new properties that have opened are filling slower than expected. Things are getting a little bit scarier," he admits.

Mel Holsinger of Executive Self Storage in Tucson, Ariz., shares his experience. "The Arizona market seems to have stabilized, but we're still surprised at the number of projects proposed or that are under construction, because it seems that the occupancy of projects--at least in Arizona--has been bound in certain markets and stabilized in others. I don't see occupancies rising significantly. And, obviously, if more projects are brought on board, they're going to decrease. This is also making for some interesting pricing situations."

Mike McCune of The Argus Self Storage Real Estate Network in Denver says, "We're seeing dramatic saturation in some markets, modest saturation in others and, in some areas, hardly any. Unfortunately, however, almost bigger than the problem is that we don't know how big the problem is. All we have is anecdotal information on specific markets," he says. "We don't know what the dimensions of the market are, and you look at some of the numbers and you still see rents going up and occupancies only being slightly impacted, but you don't know how good those numbers are either, how representative they are."

Dave Cook of Tacoma, Wash.-based Tech-Fast Metal Systems notes that aside from the potential danger of saturation, cost has become another issue. "The dynamic from our perspective is that construction is just more expensive. The cost of development is significantly higher and continues to go up--you're talking about the cost of land, code application, growth management ... That makes it more difficult for the self-storage developer and manager out there to get an appropriate return on his investment and manage his debt correctly," he says.

The result of this? Developers are having to be more discerning in their site selection. "They're completing more comprehensive market studies and paying greater attention to the demand/supply relationship of storage within submarkets," Greenwald points out. "The business has also become much more niche oriented. Rather than looking at the well-publicized saturation of a major market area, developers are looking at small submarkets or niches within the metropolitan area that can justify a storage property."

The Question of Demand

With the cost of development rising and site availability becoming more of a challenge, developers must address the question of demand--can it support the product? According to Holsinger, demand is increasing, though not significantly. "Every year there is more demand for the product, and right now it seems the supply is at least equivalent to that demand in a lot of markets. As the demographics change, I see more and more demand in the Northeast, particularly in your more dense markets like New Jersey, Pennsylvania and New York. There are still a lot of opportunities, a lot of markets that are still underserved," he says.

Steve Cooper of Digitech International, based in Asheville, N.C., agrees that a greater portion of the general population are using storage facilities. "It's a cultural as well as a demographic thing," he explains. "As the facilities being built are more modern and sophisticated, they're attracting a greater clientele. When you put in features like security systems, etc., you keep your commercial users happy as well, and attract a lot more professionals."

But the demand isn't strictly for more self-storage--it's for a different kind of product. "Every new facility is certainly more attractive, more oriented on technology, more competitive than existing facilities," says Bancap's Keller. "So all things being equal, I'm seeing new properties coming on the market being able to generate higher rental rates. Even in terms of getting the loans and appraisals done on these projects, it's a fair bet to say that a new property will be able to get above-market rental rates as compared to existing facilities."

Jim Chiswell of Williamsville, N.Y.-based Chiswell & Associates adds, "Based upon my consulting work across the country, I'm seeing a growing demand for space. Average unit sizes are getting bigger, and despite the comments to the contrary, the majority of projects are still being built with manager apartments (zoning permitting)." This indicates an enduring interest in the product, as well as a confidence in its longevity.

However, while there is certainly greater demand for self-storage and the perception of the self-storage product has changed in the eyes of the public, that does not necessarily mean that it has become solidified enough to withstand another recession, should it occur. According to Pogoda, "We've become a bit sanguine about how good things are, but we're going to have to wait it out through the next recession--whenever that comes about--to see whether storage is as commonplace as we think it is," he says. "One of the concerns that we should all have is not to be too complacent about how storage is 'trendy.' When the economy is as strong as it is, people throw money about much easier. I'm not a believer that this is a recession-proof industry. I've not witnessed it, and my experience has been just the opposite."

Maturation or Saturation? Now What?

Although McCune firmly believes self-storage to be looking at a year of great uncertainty--based upon the industry's dependence on the general economy--most of our experts indicated the upcoming year will not witness any dramatic changes, particularly not a significant downturn or slowdown in development. "They've been talking about a downturn in this industry for three years now, but the only thing we see is that it keeps getting stronger," says David Reddick, president of Sentinel Systems Corp. in Lakewood, Colo. "We've just had our best year yet, and that's partly because of our product and service, but partly because the industry is strong. I don't see anything slowing down in the near term."

Digitech's Cooper agrees. "If you listen to the futurists who have been speaking to our industry at various tradeshows and conferences, they are--for the most part--speaking in contradiction to the Wall Street prognosticators who say we're going to have a downturn and inflation is going to go crazy again. The industry speakers are saying that, primarily because of the Baby Boomers, we're going to see a real bull market for the next five to seven years." While there was little indication that most experts believe the industry's good fortune will hold out that long, the overall sense is that it will at least carry us through the next year.

"Economic conditions are still favorable for the development of self-storage," says U-Haul International's Carlos Vizcarra. "The major barrier to entry that we see is just the restrictive zoning statutes in many municipalities, but other than that, the economy is still supportive." This does not mean, however, there won't be a certain amount of stabilization of the rate of development. Tech-Fast's Cook does predict a leveling off. "More and more, the dynamics of financing and overall economic health for the country is what dictates our ability to continue to develop," he says. "We have not seen any indication filtered through our efforts that there is waning interest for the product from the public, and I would have to say, in general, that over the next year we'll see a level of development activity comparable to recent years. But the signs are out there--we've grown into an industry that can be impacted by general economic forces out of our control.

"The forecast is for stock-market performance, availability of financing at reasonable rates, fear of inflation, etc. If we begin to see any significant stock-market dips or high consumer-debt building (which is kind of what is occurring at the moment)--some of those signs start to chip away at the wonderful growth that we've had. I think forecasters would say that just one of those things happening can be enough to push us into a slow-down or recessionary time period. They're saying that things will calm down in a year, possibly two--but it'll be a slowdown and not anything dramatic. I don't see anybody just turning off the spigot. Nothing's going to just stop. Will they level out? They certainly will."

Regardless of what may be the most realistic prediction, there is still a lot of optimism out there. "Absolutely we are looking at another good year," asserts Cooper. "I think it's going to be an astounding year." And according to Chiswell, "I think 2000 will continue to be an excellent year for our industry. There are a number of projects already under construction that are coming online. These new projects, like the ones opened over the past several years, are going to have an impact on the older projects. The new, state-of-the-art projects will continue to erode the marketshare of many first- and second-generation projects."

Construction Trends

So let's talk about that for a minute. If what Chiswell and Keller tell us are true, and the newer, more sophisticated properties will eventually supplant the older buildings, where is development being driven? What about the higher cost of construction and limited site availability? How will those things change the landscape of development over the upcoming year?

"I personally believe that new building is going to slow down, for a lot of reasons," Pogoda explains. "First, the cost of capital is going up. Second, the cost of vacant land has skyrocketed. Land that we'd pay $2 a foot for a few years ago is now $5 or $6 a foot, and rental rates in self-storage have not increased that much--not enough to warrant paying those kinds of prices." A good point. But that doesn't necessarily translate into a slowdown of development altogether. Builders are now exploring new alternatives. "People who are interested in moving forward are looking at every avenue," Pogoda says. This perspective is one that seems to be shared across the board.

"Self-storage is becoming a true retail-type of business, and builders are spending a lot more money on the land, a lot more per square foot than they used to," says Buster Owens of Ocoee, Fla.-based RabCo Corp. "So now we're seeing larger projects on smaller sites, which dictates going up instead of out. Multistory building is extremely popular. I would say 80 percent of all projects that we're doing have at least one two-story on them. And they can afford to do that because of climate-control self-storage being more in demand. It's easy to build up when you can climatize that space and get the kind of returns you want," he says.

Cook from Tech-Fast adds, "Site availability is more difficult these days. You're spending more money on a more difficult site and having to spend more to develop it. There's no question that this fact will drive more multistory building, and it has. It's unique that we do a project that doesn't involve multistory or climate-control services." In addition to more multistory and climate-control development, the state of the current markets is also driving more retrofits.

"The trend we're seeing in construction itself is what some people are calling 'in-fill' construction, where developers go back into urban neighborhoods and convert buildings," says Digitech's Cooper. Keller expands: "Since people haven't been able to buy new property, they've been looking to develop older property; and since it's more urban areas than rural that people want to build in--at least in California--you're forced to build multistory because of land costs. To go in and do an in-fill project or conversion can be a very smart move."

Fancy, Schmancy

"A study that we completed in the last year was of self-storage properties developed over the past 36 months," Greenwald shares. "And we've found that the well-located, better-designed properties were experiencing lease-ups significantly above average. A basic business premise is that in a market that becomes saturated, the only way to increase your profitability is through market segmentation or differentiation." As a result, developers are now looking at ways to differentiate their product in order to realize a higher net income.

What exactly does that involve? A greater emphasis on amenities, technology and design. Developers are being forced to pay greater attention to detail and aesthetics, but whether that is a product of zoning requirements, sophistication of the marketplace or customer demand--or a combination of the three--is inconclusive. "Certainly developers are building nicer and more attractive facilities these days, and the local ordinances certainly have something to do with that," says Sentinel's Reddick, "but I think what really drives this trend is that building more attractive sites helps to draw business."

One of the biggest trends we've seen in self-storage recently has been a maturation of the types of services offered. "Self-storage has become a more mature product, a better-run product now that technology and security are married together in management," says Cook. "Aesthetic treatments are also important now, primarily because of zoning. If you look at growth management, whether it's managed or whether it's just a perceived understanding of a community to a developer, there's a message given that a project must look a certain way."

RabCo's Owens expands, pointing out that the greater emphasis on aesthetics relates to self-storage as it enters a more retail environment. "We're now seeing a lot of nice facades, Victorian looks, windows, different types of crown-molding features. There are a lot more architectural demands than there have been in the past. A lot of it is due to Planning and Zoning. Some of it is being dictated by the municipalities or approval boards--if you pay big dollars for expensive ground in a retail area, they don't want it to have an industrial look. But some of it is driven by the owners' requirements. They want their project to have the curb appeal that will separate them from their competitors."

Is all of this really necessary? Well, the jury is still out on that. There are those, like Pogoda, who are not convinced. "There is much more attention to architectural detail today, true; and a lot of that is forced on us. But the bottom line is that--contrary to what people may think--the average tenant doesn't know the difference. They want a nice, clean, attractive facility, but it doesn't have to be the Taj Majal. I think the trend that will continue, however, is one for more amenities, such as climate control. That's where the demand is."

Argus' McCune agrees that some owners will tell you that the fancy accoutrements make a facility easier to rent. However, he also points out the effect this could ultimately generate. "What's going to happen is that if you get into a price war, the lowest common denominator sets the price. So the guy who hasn't spent as much money is going to set the price. Some consumers are simply driven by price--their perception of value is different. I'm not saying the amenities aren't important--they are. But there is a certain segment of the market that is not willing to pay for them. The concept of high-quality self-storage is more involved in the owner's mind than in that of the general public. Particularly in bad times."

Talking Tech

One trend that everyone agrees will persist as the year progresses is the addition of more technological features, including management software, security, payment options and use of the Internet. "What automation and technology give you is convenience and service and efficiency," says Cook. "Whether it's development, construction, or operations and management, any way that you can use technology to provide a quicker path to better service is a benefit. And the pressure will be there in the next year for you to automate and use technology that will make things more customer-friendly, faster."

According to U-Haul's Vizcarra, "Technology is really playing the key role in helping to differentiate the storage product. We're seeing a lot more climate-control storage, enhanced security and other features, such as credit-card or debit payments, etc." Reddick, who anticipates greater use of special features such as electronic funds transfer, agrees, "Someone who is aware of the technology to help manage and protect his facility is getting a leg up on his competitor because they are upgrading what they offer, enhancing their salability to the public. What we see in the upcoming year is a lot of upgrades."

Let's not forget to mention the ubiquitous presence of the World Wide Web and its effect on this industry. "Obviously, the Internet is impacting everybody's business already," says Holsinger. "Marketing strategies are going to change simply because technology has changed. And where, in the past, we relied on the Yellow Pages--and it's still an important venue--it's use is somewhat decreasing as more and more people use the Internet to access information."

Chiswell also stresses the importance of this indispensable cyber-tool. "I think we'll see an even greater impact of the Internet on our industry in the next several years. The snowball gently rolling down the hill is starting to gain momentum already in the buying and selling of cars and homes. Our industry will not be far behind. I envision the day in the next five to 10 years that new unit rentals, billing, collections and marketing will all be primarily focused on a facility's Web site."

"In the next two or three years, the Internet capabilities and the like are going to explode," adds Pogoda. "It's clear that's where things are heading. There's just no doubt about it."

It's All About the Money, Honey

In the end, questions regarding market saturation and site availability, multistory building, climate control, architectural pomp or amenities will all be moot if the bottom line is not addressed: financing. Without funding, it is not a question of "If you build it, they will come." You just won't be able to build it. So do the experts foresee any significant changes in the availability of funds? Not particularly, though there is some skepticism as to how long the lending institutions will remain comfortable with overbuilt markets.

According to Cooper, the financial markets on which self-storage will hold up and continue to be stable for some time. Holsinger, on the other hand, predicts a change. "Lenders will eventually become aware of the real economic impact all the new development will have on long-term projects. It's easy to get financing when you have no competition within three or four miles of a major metropolitan city. But take Tucson, for example: Now, there are almost 80 properties where, five years ago, there were 55. The lenders putting money into these markets are going to get nervous because the stores are not going to absorb the square footage as was projected. It usually takes lending institutions a couple of years to catch up to what's really going on," he says.

Chiswell remains hopeful. "I think it may get a bit harder to find construction loans as the year goes on, but I still see strong indicators for the first half of 2000. Because of the growth we have seen in the past five years, it's more critical than ever for developers to do their due- diligence homework on site selection, however. The days are long gone when justification for a project was, 'I already own the land. How hard can it be?'"

McCune believes long-term financing is going to become much more difficult to obtain and banks will be frightened off. "The banks are still doing all of the development loans, and if they begin to realize that there's not good take-out money, they're going to begin to tighten up, and that will slow development down. But for now, the pipeline is full." He also feels there are fewer players than there were a year ago, which will result in consequences for people attempting to refinance or wanting to sell properties, for example. "That's going to have an impact on the general liquidity of the real estate," he says.

Something else to consider is interest rates, which are presently rising; and according to Pogoda, if they continue to do so, it will prevent people like him from continuing to develop. "My cost of capital would be too high, and then the cycle starts. When that effect might come about, I have no idea, but I have to assume rates are going up and investors' needs for return are going to be greater than before. I have to adjust my projections. Others should be doing the same, and if they aren't, I think they're foolish."

Are we painting a grim picture? Not really--just a realistic one. But experts like Greenwald are interpreting tighter financing and interest-rate increases as mere speedbumps, put into place to ensure the market doesn't overbuild as in previous cycles. Lenders are being more selective, and builders are required to conduct more comprehensive feasibility studies, but this should, ultimately, be for the greater good of the industry.

In the End

Do we know, yet, what to expect from the self-storage industry in this supposed "new millennium," or will we, as some have predicted, stumble about in uncertainty and hope for the best? All signs point to continued success, as long as a certain degree of caution is maintained. Overall, it should be business as usual.

"The industry is so strong right now, so solid. I surely don't see any major changes coming this year," Pogoda admits. "I foresee the trends continuing for some building, though I think it will slow down. I see the trend continuing for more climate-controlled space and more amenities at sites. I see it becoming increasingly expensive and difficult to find the kind of self-storage locations in the more developed markets that the pros really want to find. This is going to force people to be more creative and explore other alternatives. But the industry is fundamentally very sound. Short of there being something catastrophic with the interest rates or the economy, why expect things to change dramatically?"

Others are more skeptical. "I think we're looking at a year of great uncertainty," says McCune. "It's dependent upon the general economy. Any kind of blip will have a significant impact, and I think that overbuilding in some markets is also going to have an effect. And then I think financing is one of the biggest uncertainties, as it impacts the liquidity of the marketplace as well as value."

All things considered, experts are optimistic about what lays in wait for business this year. "I still feel that the development and ownership of self-storage facilities is one of the best entrepreneurial opportunities, not only in the United States, but around the world," says Chiswell. "I'm still excited about our industry and its long-term future."

Insurance Claims by Self-Storage Facility Owners The year in review

Article-Insurance Claims by Self-Storage Facility Owners The year in review

Insurance Claims by Self-Storage Facility Owners
The year in review

By David Wilhite

It should come as no surprise that the big insurance news for 1999 was Hurricane Floyd, which caused untold millions of dollars of losses in storm-related damages (the damage total is still being assessed at the time of this writing). However, despite the destructive nature of the storm, 1999 ranks as one of the better years for the least number of insurance claims filed by self-storage facility owners. From an industry viewpoint, this is a strong indicator that owners are becoming increasingly aware of the hazards their operations are exposed to and are taking successful measures to guard themselves against risk.

As we enter the new millennium, it can be valuable to take a look at the types of claims that facility owners most commonly reported in 1999 in order to help you assess your own risk of loss for the coming year. As you will see, many of the types of claims filed were at least partially preventable, and there are a variety of measures that you can implement immediately and at little or no cost that can help reduce your risk of exposure.

Flood Damage to Buildings/ Premises: Flood damage from Hurricane Floyd, as well as various severe thunderstorms, accounted for the largest percentage of claims filed by self-storage facility owners in 1999. Many of these claims were covered by the optional insurance offered by the National Flood Insurance Program. The NFIP can provide affordable flood insurance for facility owners, even if your operation is located within the boundaries of a flood plain. The maximum amount of flood coverage currently available through the NFIP is $250,000, although it may not be necessary to purchase the maximum amount. If you are located outside a high-risk area, you can purchase partial coverage and receive an ACV (actual cash value) payout for damages up to the purchase amount. Excess Flood Protection, which is available up to twice the regular limit, is also available if you have a lot of equity in your buildings and property.

Wind Damage to Buildings/ Premises: Gusting winds from Hurricane Floyd caused significant damage to facility roofs, outdoor signs, etc. To help avoid a claim, take immediate preventative measures to secure your facility as soon as a hurricane warning has been issued. Begin by boarding up windows or securing them with storm shutters, and brace all exterior doors shut. Secure any loose objects surrounding the area, such as trash cans, signs, etc., so that they do not become flying missiles. Remember, also, that in addition to protecting your business from hurricane- and wind-induced damage, a complete insurance package should also include loss-of-business-income coverage and extra-expense coverage to protect your finances in the event of a loss. Your best bet is to purchase property coverage on a special form basis, which also protects against hail, smoke, explosion and other perils, unless the policy specifically excludes them.

Lightning-Induced Power Surges: Several self-storage owners across the country reported computer and equipment damage due to lightning-induced electrical power surges. Some of these losses could have been avoided had surge protectors been in use. Also known as lightning barriers, surge protectors provide protection against electrical storms by instantaneously clamping down on power surges and diverting them harmlessly to the ground. Even in cases where no outright equipment failure may occur, the life of electronic equipment can be significantly reduced following a lightning surge, and surge protectors can significantly extend that life. Remember that damage from surges may not only result in equipment repair and replacement, but also in the loss of income, which can far exceed the cost of protection devices.

Loss of Business Income: Last but not least, Hurricane Floyd was responsible for a large percentage of claims for loss of income. Business-interruption insurance (specifically loss-of-income coverage and extra-expense coverage) is designed to minimize your risk in the event of a covered cause of loss. Keep in mind that loss-of-income and extra-expense coverages are limited to the actual length of time required to rebuild, repair or replace your damaged buildings or business personal property--in other words, the amount of financial loss is determined by the length of time it takes to get your facility back in business. Note also that for loss-of-income coverage to kick in, the suspension of your business operations must be caused by direct loss or damage as a result of a covered cause of loss; it does not cover a loss of income due to such causes as loss of power or forced evacuation.

David Wilhite is the marketing manager of Universal Insurance Facilities Inc. Universal offers a complete package of coverages specifically designed to meet the needs of the self-storage industry, including loss of income, employee dishonesty, comprehensive business liability, hazardous-contents removal and customer storage. For more information, contact Universal at Box 40079, Phoenix, AZ 85067-0079; phone (800) 844-2101; fax (480) 970-6240; www.vpico.com/universal.