The Canadian self-storage market has seen another evolutionary year, with many changes occurring from coast to coast. In some cases, the trends mimic those seen in the U.S. market, but with a twist. Here’s an overview of what’s been occurring across the nation in the areas of industry development, financing, taxes and more.

An Economic Overview

Overall, the Canadian economy remains positive but slow. Let’s look at some of the individual provinces:

Alberta. Albert appears to be gradually moving off the bottom of its oil-price-related recession. Self-storage occupancies in the region remain low but are recovering into the 70 percent range.

British Columbia. Facilities in British Columbia have cooled to more normal occupancies and rate-increase percentages. This has been in part fueled by significant changes in the home-sales market in the region. Greater Vancouver has only begun to generate data that shows 10-year lows in home sales. This has meant a significant reduction in residential activity, which can be felt at the self-storage level in far fewer rentals. It’s still too early to tell how far or long this trend will continue, but it’s noticeable.

Ontario. The province has also seen a cooling in the residential real estate market, which reduces the immediate demand for storage. Most of this has come from high historic prices, interest-rate increases, foreign buyers’ tax and more stringent mortgage qualifications for residential borrowers.

Maritimes (New Brunswick, Nova Scotia, Prince Edward Island) and Quebec. These self-storage markets have been reportedly good and steady, though it’s unclear what will result from North American Free Trade Agreement negotiations with the United States. This may result in significant impact, as each is the other’s largest trading partner.

Saskatchewan. This province is seeing slow and steady improvement from a rather depressed economy over the last couple years.

Development

As in the United States, self-storage development is booming in Canada, with significant amounts of new self-storage planned or underway. The many years of industry success continue to encourage new investors to enter the business. However, there are significant barriers to entry, namely the high cost to buy land and build.

Major markets like Calgary, the Greater Toronto Area (GTA) and Vancouver have seen significant growth and interest. (It’s extremely important to understand here that “rapid growth” in Canadian cities means two to five new sites in a trade area vs. the dozens of sites that might pop up in American locations.) Still, these new facilities can create significant disruption in mature markets.

New, modern sites are much larger than their predecessors. In the past, new facilities ranged from 40,000 to 75,000 square feet. Today they can be 100,000, 250,000 or, in an extreme case, 500,000 square feet of net rentable space. This has never been the norm in Canada, so it’ll be interesting to see how these mega-facilities perform. Moreover, what will be their impact on surrounding sites? For example, markets that have traditionally stabilized at 2.5 to 3.5 square feet per person of population will now be tested to see how fast they can absorb the new supply and at what rate.

In Vancouver, most new supply is still in development or under construction. Unfortunately, some trade areas are seeing multiple new projects go up simultaneously. This will likely prove similar to what’s happening in the GTA, where several large sites will open at the same time to compete directly. It’s anticipated that occupancies will need significant time to recover and rates will be heavily impacted. Given the significant costs of these sites and the aggressive pro forma that often exists in the business plans, it’ll be interesting to see if these markets become overbuilt. It’s certainly possible.

Fortunately, some operators are being extremely disciplined with new development. Their internal feasibility studies are based on conservative expectations, and if construction costs exceed model limits, the projects don’t proceed. Moreover, lease-up periods to stabilization are often accomplished in four to five years. This reflects how conservative some veteran operators are. This is with good measure, as there’s enough evidence to show that large, new facilities have often taken surprisingly long to stabilize.

Overall, construction pricing has been rapidly increasing. A modern, multi-story site ranges from $120 to $230 per square foot for building hard costs. This is far from the $55 to $70 of only a few short years ago.

Typical class-A projects in urban and suburban markets are often working out to $15 million to $30 million on the cost side. This may explain why there are a significant proportion of new operators entering the industry. It hasn’t been uncommon to see experienced operators pass on projects that are then picked up by a new developer. It’ll be interesting to see if the new operator’s business model performs to his expectations or ends up being a significant cash burden for years to come.

Two other factors affecting new construction are steel tariffs and development cost charges (DCCs). Tariffs have increased the cost of steel systems used in self-storage, resulting in double-digit percentage increases. City officials haven’t lost sight of the opportunity to charge developers significant DCCs, either. In the most extreme cases, these can be more than a couple million dollars and must be paid prior to construction. These large increases are further testing the ever-narrowing feasibility gap on new projects.

The Impact of New Builds

All the new development is understandably affecting existing operators. For example, the GTA has seen a fair number of new sites open in traditionally strong and well-performing markets. Not surprisingly, the first new property reduces the overall occupancy of existing facilities. Then, as more new locations continue to open in the same area, the impact becomes more substantial, leading to a significant reduction in market occupancy and, eventually, rental rates.

In Calgary and Edmonton, Alberta, where new facilities have opened recently, operators were already weathering a multi-year recession, which started when oil pricing collapsed. Consequently, most new entrants to the market have planned for a slow and steady lease-up, and their expectations around rent increases are extremely low to non-existent. Finally, they’ve planned greater operating cash reserves to carry the business for many years to break even.

Sadly, there are too many operators with rent-up projections of 12 to 24 months and rates of 40 percent above market. This isn’t conservative and will likely prove to be a costly mistake.

Financing

On the finance side, higher interest rates have created challenges. The Bank of Canada’s benchmark rate has increased to 1.5 percent, up from .5 percent in 2017. Consequently, the five major banks have further set the tone by increasing rates to 4 percent to 6.5 percent on a term loan. Construction loans are typically higher, but interest-only. When these rates are added to longer rent-up lengths, cash-flow constraints and conservative Canadian lending, it can create issues. In many cases, this is where some veteran operators wait for acquisition opportunities of lesser experienced operators.

On that note, self-storage sales in Canada are extremely few, with most provinces rarely exceeding more than five to 10 transactions per year. This explains why the top five facility operators only have around 250 facilities between them. Most industry ownership portfolios remain in the single digits.

Taxes

Unfortunately, property taxes remain one of the largest annual expenses for self-storage businesses. The government continues to aggressively assess storage sites and tax them at rates that can far exceed what a homeowner would pay. For example, a Vancouver facility would pay more than four times the rate of a residential owner; yet that same site would put far less demand on local roads, emergency responders, schools and other city services. In some circumstances, a full month and a half of gross income is required to pay this expense.

In addition, jurisdictions that assess taxes on an income-approach calculation use a full stabilized occupancy rate, even though the facility may have just opened and be years away from that percentage. This puts a large, immediate burden on the site, causing it to operate at a financial loss. Organizations such as the Canadian Self Storage Association have had significant success in dealing with Provincial Assessment Authorities, explaining the business of self-storage and what could be deemed fair taxation.

Ongoing Operation

Operationally, self-storage facilities continue to modernize and take on a more professional, retail look. In many cases, improvements start with the basics of site upkeep and maintenance. Older facilities have been renovating to add a more contemporary style with new doors, hallway reskins, fencing, gates and LED lighting.

Increasingly, customers are using their mobile devices to find storage, and more people are finding storage via the Web. A strong website and online presence is, therefore, a must. This can be a challenge for individual operators as they work hard to understand and optimize digital advertising and search engine optimization.

Not surprisingly, it’s common to see self-storage management software being used at storage facilities today, regardless of whether they’re a family-owned, single location or part of a multi-site portfolio. These applications tie into online payments and rentals, and even remote-management tools. Even onsite lien sales are phasing out, with most properties choosing online auctions through industry platforms that allow for greater sales transparency and ease of sale.

The Canadian self-storage market has enjoyed varying levels of stability but will now be tested with significant growth, particularly as land and construction costs are at all-time highs. New sites are being pushed to fill faster and at higher rates to meet their pro formas. This may not be realistic, especially in markets that risk overbuilding. It’ll become increasingly important for older facilities to modernize and stay competitive.

Robert Madsen is president of the U-Lock Mini Storage Group and a director of the Canadian Self Storage Association. Born into the industry, he has more than 25 years of professional experience. Madsen started in the business with plunger, broom and hammer in hand, progressing to manager and, ultimately, executive. He’s also a moderator for the Self-Storage Talk online community, going by the username “Madman.” For more information, visit www.selfstorage.ca.

If you’re responsible for the efficiency and profitability of a self-storage business, you’ll need innovative vision and smart decision-making to succeed. In his 228-page Executive Leadership Guide, Bob Copper, owner of consulting firm Self Storage 101, shares high-level strategies for increasing the value of an industry asset, covering topics such as staffing, marketing, operational audits and reviews, revenue, expenses, goal-setting and more. This softcover companion will guide you through critical processes you need to take a storage operation to the next level. If you're a self-storage owner or operator, this book is for you!

As a prominent consultant, author, speaker and trainer, Copper has worked extensively with hundreds of self-storage owners, operators and managers to develop strategies for operational improvement, revenue growth and value enhancement. As a facility owner himself, he has a unique perspective that relates to working with other operators.

Additional books written by Copper focus on customer service, facility management, revenue management, sales and more. Visit the ISS Store for full product details and titles. Take charge of your self-storage operation today!

Commercial real estate firm Marcus & Millichap has released a 2019 U.S. investment forecast for the self-storage industry. The 51-page PDF report offers analytical insight on a national, regional and local level. Produced by the firm’s National Self-Storage Group and released through its research-services division, it’s available for free download from the company website.

The publication addresses:

• Economic drivers for 2019
• Supply, development and rental trends in numerous markets
• Capital-markets trends
• Insight to the role of demographics in the industry

“Though [project] completions set an all-time high in 2018, the wave has begun to recede. Tighter lending has joined the impact of rising building and labor costs to restrain self-storage construction in 2019,” the report states. “It is also worth noting that construction has generally been quite concentrated, with just five metros receiving 25 percent of the supply over the last three years. Though new competition and properties in lease-up could create short-term challenges on a localized basis, several major metropolitan areas still face a shortage of self-storage space.”

Marcus & Millichap produces more than 2,000 research products each year, according to company officials. Its research-services department offers a range of publications, from national economic perspectives to market-specific analyses. Its website enables users to search for reports by property type, location or keyword.

Founded in 1971, the company is a commercial property-investment firm with more than 1,700 investment professionals in offices throughout Canada and the United States. It closed nearly 9,000 transactions in 2017 with a value of approximately $42.2 billion.

Source:
Marcus & Millichap, 2019 Self-Storage US Investment Forecast

Update 2/12/19 – Benchmark has opened its new facility in Hartland, Wis. The property contains five buildings comprising 47,000 square feet of storage.

“For storage, it is very important to be close to your clientele, and [Highway] 83 is such a great artery between Delafield and Hartland,” Hafemann said. “It's a clean and safe building. It doesn't look like your traditional storage facility.”

Hafemann and Kahle both work full-time jobs but saw a need for storage in the area. “Our motto is to find under-serviced aspects in communities, and we noticed there were no new storage facilities in the area. We decided this was a great resource for the community,” Hafemann added.

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10/10/17 – Benchmark Secured Storage of Hartland LLC is building a new self-storage facility in Hartland, Wis., near a commercial park and close to Wisconsin Highway 83. Managing members and lifelong friends Doug Hafemann and Aaron Kahle have raised $1 million of the planned $1.2 million needed to construct and operate the business, according to the source. The money came from a private-equity fund that included the members’ investment. The project will also include financing from First Bank Financial of Oconomowoc, Wis.

Construction will begin this month, with completion expected in the spring.

The property at 840 Rose Drive will contain a three-story main building as well as four single-story structures comprising 47,685 square feet of space in 399 climate-controlled and drive-up units. It’ll also include a retail office, conference room and loading area. Security features will include access-code entry, perimeter fencing and video cameras. The site will be open daily and offer extended hours to customers.

Kahle’s business, Kahle Builders LLC, is the general contractor on the project. Bill Conine, senior project manager with Perspective Design, is the project manager. Once the facility is built, Hafemann will operate it.

In its intent to preserve the city’s historic ambiance, the Rogersville, Tenn., City Council unanimously voted this week to move forward with an ordinance that would ban indoor self-storage developments along a majority of Main Street. The order would also reserve any vacant property for developments that would generate sales tax, according to the source.

The Feb. 5 vote was the first of three readings the council will hear on the subject. If passed, the ordinance would affect the Gateway Corridor from the intersection of Ebbing and Flowing Springs Roads, west to the intersection of U.S. Route 11W. Only a portion of unincorporated sections of Main Street at the edge of the city would still be considered for self-storage.

Rogersville doesn’t have any zoning in place to prevent storage development, particularly in the historic district, according to alderman Brian Hartness, who’s on the planning commission. No new projects have been presented to the planning commission. One storage business near the water department would be grandfathered in, the source reported.

Source:
Times News, New Indoor Storage Businesses Banned on Rogersville's Main Street

 

At 10 Federal, our focus is on operating unmanned, autonomous self-storage facilities. Over the past four years, we’ve tried numerous technologies and methods to refine the process, and I’m pleased to report the model is succeeding. Properties that have been on our platform for a minimum of six months have increased net operating income an average of 18 percent. With our debt leverage, this equates to a 52 percent increase in the value of equity invested!

What’s important to recognize is technology is replacing labor. It doesn’t matter what industry you’re in—there are more machines, computers and robots than ever performing work that used to be done by people, and productivity is increasing tremendously through technology use. For example, we have one property manager who oversees all 15 of our locations. That’s pretty efficient!

Our goal is to find the maximum point on the curve where one axis is customer satisfaction and the other is cost. Effectively, we’re looking for the best tenant experience at the lowest rate. We’ll look at any technology that can improve convergence. However, the tools we employ can be used by any self-storage operator. Pick one or all. Any will increase the efficiency of your operation and save you time, money or both.

Before I dive into the details of the technology we use, I want to emphasize that the following is not a definitive list. Our industry is full of great vendors who are constantly refining and improving their products. This is simply what we’re using for our current model. I’ll distill items into three categories: sales, operation and monitoring. I’ll also shared challenges we faced to implement new technology and the effect it’s had on our customers.

Sales

Our sales revolve around a leasing-enabled website and kiosk as well as a call center. A leasing-enabled website allows a prospective renter to create an account, select a unit, enter payment information, create a gate code, electronically sign the lease and move into the unit all on his own. Twenty-four percent of our tenants rent through our website without ever talking to us. Not only is this optimal efficiency, it gives us a big advantage. We can lease 24 hours a day, whereas our competition can only rent during business hours. We average three to five leases per facility per month through after-hours leasing.

A leasing-enabled kiosk performs all the same functions as the website. Though only 6 percent of our leases originate through this tool, I still recommend having one. The use is enough to justify the investment, and the kiosk doubles as a pay station and information terminal for customers. Further, it establishes an “office” where renters begin their onsite journey.

Another critical item you need if you’re operating an unmanned facility is a model unit, since after price, the next most common question from customers is, “What size unit do I need?” We either convert an existing office or buy a 10-by-20 portable-storage unit to use as the model. We mark the smaller unit sizes on the floor using colored tape. Placing this near the kiosk allows customers to visualize the space they’ll need.

The call center is the final and most critical sales channel. Seventy percent of our leases originate here. Units are rented over the phone, or the customer can complete the lease at the kiosk or website. You can’t escape having a call center if you go unmanned. We established our own, as unmanned sites were pretty specialized when we started. Now, there are many great call-center options.

None of the above is relevant, however, if the customer doesn’t know about your store, so it’s critical to have an online presence. Start with getting a Google My Business Listing, then supplement with Google AdWords. I love this advertising channel because you can turn it on and off as needed.

Operation

For payments, we only accept electronic—no cash or checks. We lose 10 percent of customers when we acquire a facility and enforce this requirement, but we recover that loss quickly and the system is very efficient.

Next is the overlock challenge, specifically how to release an overlocked renter if there’s no manager onsite. We use a lock system we developed ourselves, but there are other automated lock options in the industry. Even if your facility is staffed, an overlock system will help with efficiency, as the manager won’t have to spend time removing overlocks, and locks can be removed even after hours. It’s a better customer experience.

Our auctions are all online. It’s rare that we don’t sell a unit, and we’re relieved of having to haul off junk, as that burden falls to the auction winner.

We do employ part-time maintenance techs who invest an average of 10 to 20 hours per facility per month. That’s still far better than 160 hours per month for a full-time manager. A maintenance tech mows, blows, cleans, overlocks units, takes auction photos and handles other routine tasks. We’re experimenting with 360-degree cameras and virtual-reality headsets that will allow our maintenance director to be “present” with the tech to do things such as walk-throughs or troubleshooting a gate.

Monitoring

We rely heavily on our camera system and are experimenting with analytics cameras. A legacy system records what has occurred on site, but an analytics system can be trained to recognize if a door or vehicle gate is stuck open. Plus, the cameras can see thermally, so they can recognize if a climate-controlled building’s temperature is outside of its target range or there’s water on the floor, indicating a leak. Our goal this year is to make the analytics cameras our central nervous system to monitor all aspects of the facility and actively notify us of exceptions.

Challenges

We have experienced some challenges when introducing technology at our properties, and they can be divided into two categories. The first we’ve defined as “the incident of failure rate” and the second is simplicity.

With unmanned operations, we have no one on site to deal with things that fail or break; hence, our goal is to get the frequency of something not working as close to zero as possible. There are a lot of amazing whiz-bang technologies out there, but if they’re not extremely reliable, they aren’t a good fit for unmanned sites.

Also, when you’re unmanned, there’s no one on site to explain how anything works. Every process must be as simple as possible so anyone without prior self-storage experience can jump right in and execute.

We work hard to get tenants onboard with our technology. When we acquire a facility and implement new tools, we lose 10 percent of the rent roll, on average. That may sound bad, but that same technology allows us to quickly recover those lost tenants. And, by the way, those are our “least efficient” customers—the ones who insist on paying by cash or check—so we’re not exactly sad to see them go.

Most tenants are remarkably comfortable with our technology, as we try to keep it in the vein of interfaces they’re already used to, such as a website, kiosk or combination lock. It’s all familiar to them thanks to online shopping, Redbox and ATMs.

Whether you’re thinking of going unmanned or just looking to find new efficiencies, I encourage you to attend industry tradeshows and see the technologies firsthand. Consider things that are easy to implement, such as connecting your gate to your website and management software. Chances are, everything is already in place, you just need your software provider to flip that switch. Then you can rent units 24 /7! This is just one way you can better serve customers and lower your operating costs.

Brad Minsley is a co-founder of 10 Federal Storage LLC, responsible for operations including new-technology development, acquisitions, management functions and finance. 10 Federal operates 17 unmanned facilities in the Carolinas and Virginia. For more information, visit www.10federalstorage.com.

When I was younger, I used to read a comic strip called “The Family Circus,” which revolved around a mother, father and four young children. With that many kids, crazy things were bound to happen: broken dishes, baseballs through windows and muddy dogs running through the house. Every time the parents would investigate an issue, they’d get the standard kid response: “Not me,” “I don’t know” or “Nobody.” Comic creator Bil Keane even drew in little invisible ghosts with these names to represent the guilty parties.

If you’re a self-storage owner, I’m sure you’ve had experiences like these with your staff. As funny as it is to put the blame on a nameless apparition in a comic strip, finger-pointing is alive and well in the workplace. It’s common to hear employees say things like, “I didn’t know we were supposed to xyz,” “Nobody told me to do xyz” or “Whoever did xyz, it wasn’t me.”

To combat this behavior, it’s important to implement specific policies and procedures for your self-storage business and hold staff accountable for them. Put them in writing so they’re clear and accessible. Think of these rules as a book of recipes containing all the ingredients, measurements and instructions necessary to create the perfect operation.

Making a List

To figure out what should go into your policies and procedures manual, grab a pen and paper and build an outline. Start by reviewing all daily tasks, from the moment your manager arrives to the time he leaves at the end of the day. Self-storage has quite a few moving parts, so don’t take anything for granted. Include even obvious items such as turning lights on and off, turning on the computer, and taking out the trash.

The great part about your outline is it can easily be converted into checklists that can be used to guide daily operation. You can use these as the foundation for your manual, elaborating on each item. Checklists help us keep our mental reservoirs full, as we don’t drain them trying to remember rote information. The worst place to store anything is the human mind because we can only remember so much without help.

By the time you’ve finished your outline process, your checklists should be extensive. Following are a some of the things they should include.

Company Basics

• Who are you?
• What’s your company’s story?
• What are your corporate values?

General Policies

• What’s the chain of command?
• Who’s responsible for specific aspects of the operation?
• How are polices changed?
• What are the rules for using company property?

Office Operation

• What company property is onsite?
• What’s the contact information for local vendors and emergency services?
• What are the daily, weekly and monthly procedures?
• Who orders supplies?
• What software does the property have, and how is it to be used?
• How should the office look?
• What items should be on the office counters?

Marketing Plan

• What’s the marketing plan, and who’s responsible for developing it?
• Who’s responsible for executing it?

Sales Process

• How should the phone be answered?
• Is there a sales script?
• What’s the procedure to show a unit?
• How often should a manager follow up with a potential customer?
• What’s the limit of your manager’s authority regarding specials, discounts or pricing?
• How is the rental agreement completed?
• What points in the rental agreement should the manager review with the customer?
• How are payments processed?
• What’s the delinquency policy?
• What kind of fees do you implement and when?
• What ancillary items, such as tenant insurance or rental trucks, are managers required to sell?
• What if a customer is considered active military?

Customer Service

• What’s the company’s philosophy on customer service?
• Who should the manager contact if a customer has an issue?
• What are the limits of the manager to handle a customer issue?
• How are refunds, change of address or customer bankruptcies addressed?

Delinquency Procedures

• What are the specific delinquency timelines?
• How should delinquent tenants be contacted?
• What’s the procedure to process a unit for auction?
• What’s the procedure to remove a customer from the auction process?

Empty Units

• What’s the vacate policy for customers?
• How should the manager process vacated units?
• What’s the procedure to initiate a customer refund?

Maintenance

• All maintenance tasks should be part of your daily, weekly and monthly procedures.
• How are maintenance issues resolved?
• Who needs to be informed before a vendor is contacted?
• Who has the authority to approve a vendor quote?
• How many quotes are required before a repair or replacement can be approved?

Security

• What kind of security does the property have?
• Where are the cameras and DVR station located?
• How is the security system operated?
• What kind of gate system is installed, and how is it operated?
• What’s the daily security procedure?
• What’s your facility lock system?
• Are the locks colored?
• How are they used for specific procedures?

Emergencies

• What are the procedures for various types of emergencies?
• Where are all the maintenance and utility access points?
• What procedure should be followed if a customer or employee is injured?
• What if the facility is burglarized?
• What procedure should be followed if law enforcement wants to access a tenant’s unit?
• What’s the policy on speaking with attorneys and reporters?
• Who should the facility manager contact if a customer issue escalates?

Natural Disasters

• What are the procedures during hurricanes, tornados, earthquakes, etc.?
• Who makes the final decision to open or close the property?
• What’s the procedure if communication to the property is cut?
• What emergency supplies should be onsite and where are they located?

Creating Accountability

These are just a few of the items your policies and procedures manual will need to address. Once you’ve built your outline and checklists, add the details. Your final version should go much deeper than this overview.

Remember, your facility-operation team can only be held responsible if they’re properly trained and have the appropriate resources. Granted, not everyone processes instructions or will react to issues in the same way, but you can minimize or eliminate variables by identifying key areas of concern and detailing how they should be handled. Once they’re in black and white, “I Don’t Know,” “Not Me” and “Nobody” will suddenly disappear, making your facility nearly gremlin-free.

Matthew Van Horn is co-founder of 3 Mile Domination Self Storage Services, a full-service operations company specializing in self-storage management, marketing, feasibility studies and consulting. He’s also co-author of “Self Storage Domination.” To speak with him about your self-storage operations, schedule a free 60-minute strategy session at www.3miledomination.com.

A woman died in a car explosion at Route 22 Self-Storage in McVeytown, Pa., on Jan. 23. Investigators identified the victim as 58-year-old Lisa Ann Casto of Hagerstown, Md. Her death was ruled a suicide, according to the source.

Facility owner Jayme Spickler told police that Casto entered the facility about 2:30 p.m. in a car with an out-of-state license plate. Moments later, it just “exploded,” Spickler said.

First responders on the scene included McVeytown Ambulance, McVeytown Volunteer Fire Co., Newton-Wayne Fire Co., Pennsylvania State Police and West Granville Fire Co.

Casto was identified through forensic testing, according to Daniel P. Lynch, coroner for Mifflin County. The incident is still under investigation.

An online obituary on “The Herald-Mail Media” states Casto is survived by her husband, two daughters and six grandchildren as well as extended family members. A memorial service was held on Feb. 1 at St. Mary Catholic Church in Hagerstown.

Units at the self-storage facility were destroyed in the blast, though sources have not specified the extent of the damage.

Source:
Lewistown Sentinel, Car Fire Death Ruled a Suicide

There are many things about the self-storage industry that make it a great business. One positive aspect is facility expenses are well-fixed and there are typically few surprises when it comes to operating costs. Another is operators have ample opportunities to increase profit and asset value through ancillary income streams.

One proven way to generate additional revenue and provide customers with a great value-add is to offer tenant insurance. Let’s look at the benefits and what it takes to implement a successful, profitable program. It’s easier than most people think.

Understand the Benefits

Tenant insurance is a smart way to gain recurring monthly income while giving tenants coverage for their stored property. If you’re only selling boxes, locks and other moving supplies during the rental process, you’re missing a revenue opportunity. When properly executed, tenant insurance can bring in thousands of dollars per year.

Without insurance, your customers are vulnerable. Their homeowners’ or renters’ policies may not cover stored belongings or may only cover a fraction of the items’ value. Despite taking precautions and instilling security measures, no storage operator can fully guarantee the protection of a tenant’s items from tornado, hurricane, fire, flood or burglary. A lease agreement releases the operator from liability for these types of losses, but tenant insurance will protect customers from the unexpected.

Tenant insurance is a legitimate, state-regulated product that offers full protection for stored belongings. It’s a win-win for the customer and facility owner.

Choose Wisely

There are many tenant-insurance programs from which to choose and a variety of providers, which gives you the flexibility to pick one that’s best suited for your business. Most vendors offer competitive pricing along with attractive revenue-share opportunities.

One important note: Unfortunately, some programs on the market are not compliant with state law and insurance regulations, so they won’t effectively protect your tenants in their time of need. Do your research and select a trusted, fully compliant program.

Revise Your Lease

After implementing your program, it’s wise to include an insurance provision in your lease that explains the facility does not insure the tenant's property, and customers are required to provide proof of insurance on all stored goods as a condition of tenancy. Make sure your provider offers the appropriate lease language to coincide with the tenant-insurance program you’re offering, as it may vary from vendor to vendor.

Consider offering tenant-insurance limits that correspond with the limitation-of-value provision in your rental agreement. You might also include verbiage that says the occupant agrees the space isn’t appropriate for the storage of jewels, furs, heirlooms, art works, collectibles or other irreplaceable items that have special sentimental or emotional value to the occupant, and he agrees not to store said items. Once the lease is signed, give a copy to your tenant along with a copy of the insurance policy and brochure, which should outline all coverage and exclusions.

Finally, self-storage owners who offer tenant-insurance programs are required to display a limited-lines license in their office. Make sure it’s current and neatly displayed. If you need an updated copy, contact your provider.

Train Staff

For your tenant-insurance program to be a success, you must have staff buy-in. The facility manager has to educate tenants, especially at the time of move-in. It’s important to discuss the insurance and its benefit with the customer. This can be done more effectively with the proper training.

Make sure all employees are properly trained on your tenant-insurance program and the benefits it offers. Most providers will offer training materials to help with the process. For some vendors, annual training may be required. Keep your team up-to-date.

Market Your Product

You also need to draw attention to your program through good marketing practices. Have plenty of informational brochures and promotional materials in stock and on display. Many insurance providers will offer posters, counter maps, window clings and stickers for use.

With the proper training and materials, marketing your program is as easy as asking for a driver’s license at the time of lease! Completing the lease addendum with the tenant should take less than two minutes. It’s a short time commitment that delivers big benefits for the customer and facility owner.

Get (and Give) Peace of Mind

Your tenants trust you with their treasured belongings. With the right tenant-insurance program in place, you can maintain a positive relationship with them, even in the event of an unexpected loss.

Your tenant-insurance provider is the quarterback for the claims process if a loss occurs. It’s licensed and familiar with the statutes that are applicable in your state. Its staff is trained to gather all documentation, evaluate the evidence and determine any claim payout. The claim-resolution process is handled by licensed adjusters through a regulated process that provides consumer rights to the insureds. It’s peace of mind for all parties involved.

Mario J. Macaluso is senior vice president for SBOA Tenant Insurance, whose program is created by and for self-storage owners. The company’s insurance products are compliant with state laws and administered by Cornerstone Insurance Producers. For more information, call 602.761.9365; e-mail [email protected]; visit www.sboati.com.