In attempts to extricate himself from the doghouse (where he frequently resided), an ex-boyfriend used to say to me, It only takes one small blunder to kill 10 good deeds.

In life, people pay far more attention to what you do wrong than what you get right. Sometimes you have to remind them of your gifts. I dont often use this space to sing the praises of Inside Self-Storage, but on occasion, I like to remind readers and advertisers (new and old) who we are, what we do and why they should continue to be our customers.

First, ISS has served the industry for 15 years, providing quality editorial and access to a wide array of products and services. This not only includes a monthly magazine, but several annual supplement publications: a boat and RV storage edition in September and international issues each spring and fall. Lets not forget the most comprehensive self-storage buyers guide and top-operator list, published every August.

The success of the magazine spurred the birth of a tradeshow division that produces annual expos for self-storage, including educational seminars, exhibits and abundant networking opportunities. The largest industry tradeshow of the year, now drawing in excess of 4,000 attendees, is created and hosted by the ISS team. Our most recent event, held in Las Vegas, February 22-25, was again superlative.

ISS

is also responsible for the annual Factbook, an A to Z self-storage guide that helps newbies find their path and veterans stay on course. A compendium of informational pieces, it covers every aspect of the business, from finance and development to operation and ancillaries. Laughably, I recently got a voicemail from a man demanding a refund on a Factbook purchase. He said, Theres no facts in this darn thingits just a bunch of articles on all different topics! Ill assume he was expecting a directory of statistical analysis, but perhaps he should look up the definition of the word fact. An industry education is based on a lot more than numbersparticularly when those numbers can easily be flawed.

Unlike its competitors, ISS does not charge for electronic access to its writings. A current edition and archive dating back to 1997 are consistently available at www.insideselfstorage.com. Articles are viewable in their complete text versions and searchable by key wordsfor free. While production costs require us to charge for a printed magazine, we dont believe you should put a price on knowledge. Free access to information is just another way we support members of the industry.

Finally, ISS proudly sponsors the Inside Self-Storage Scholarship Program, which provides educational funds for people working in the self-storage industry or their immediate family members. This year, five honorable recipients were given $2,000 to attend the college or university of their choice.

By now, many of you have heard recent proclamations made by the Self Storage Associations new president and chief executive officer, who asserts he will expand the SSA Globe newsletter to compete with this and other industry magazines. His aim? To be the one and only official voice of this industry But there cannot be only one voice. The contributions of ISS and the other reputable publications that support self-storage are too significant to disregard. Diversity of opinions and sources is vital in the news arena. Without it, we fall prey to biased information and propaganda.

Inside Self-Storage

has endured as a pillar of the industry, and weve done an excellent job. We are already an official voice of the industry; and we know youre hearing us, self-storageloud and clear.

Best wishes,

Teri L. Lanza
Editorial Director
[email protected]

When I co-founded Easybox Self Storage in 2000 with the objective of developing self-storage in Italy and Spain, I admit I felt a certain amount of apprehension. Why were we the first to develop in these countries? Was the product just a Northern European phenomenon? What if it did not appeal to the Latin mentality? Five years later, its obvious my fears were unfounded. The Spanish have taken to storage like ducks to water, and Easybox is no longer alone in its ambitions.

Spain's Demand Centers

In Spain, its easy to see why there should be a demand for self-storage. Spanish cities are population-dense by nature, and the labor force is becoming more mobile within the country. Approximately 78 percent of the country's 40 million people live in the towns and cities. In Madrid alone, with a population in excess of 3 million, 600,000 new homes have been built and occupied every year for the past three years.

This growth is partly to satisfy an influx of people to the capital from the rural areas. Its also due to young Spanish people who now tend to purchase their own homes as soon as they become part of the active population rather than continuing to live with their parents until (and sometimes beyond) marriage. With a booming economy, growing purchasing power, continuing construction and a feel-good factor absent in many other European Economic Council (EEC) countries, properties are changing hands at ever increasing prices.

Barcelona, between a range of hills and the Mediterranean Sea, is a bustling city of 1.5 million people and arguably the most dynamic and prosperous commercial center in the country. Enormous apartment blocks house hundreds of thousands of people whose only storage space seems to be the outside balcony. The city has become a popular venue for international trade fairs and is one of the largest container ports in the Mediterranean. The high-speed rail link with Madrid will add to the importance of Barcelona as a business center.

Other large cities such as Valencia, which will host the Americas Cup in 2007, and Malaga in the south have experienced substantial growth in recent years and offer tremendous potential for our industry. Only Seville among the larger cities struggles to overcome a high unemployment rate; but it remains a very popular tourist resort and cultural center.

Roadblocks

But all is not perfect for the self-storage operator in Spain. While potential customers may be plentiful, properties that fit the requirements of visibility, access, size and, of course, affordability are much harder to find. Not only is there a strong industrial real estate market, but zoning changes in favor of commercial, office and residential use/construction have permitted property owners to reassess the value of their holdings, relegating industrial builders to areas away from the self-storage customer base.

This development trend may be less of a problem than it would be in other countries, since Spain has taken full advantage of the EEC subsidies available to improve its transport infrastructure. Road communication in and around the major Spanish cities tends to be excellent. Thus, the inevitable proliferation of self-storage facilities over the coming years will likely take place outside city centers.

Construction regulations are another hurdle. Municipal authorities have different regulations and are not consistent; however, the fire department usually has the strongest say. A thorough understanding of the rules and regulations is essential for negotiating with local authorities and can save many months in the process of obtaining licenses. A year or more of delay is common when there is a backlog of applications. But if an application is properly presented and negotiated, the wait can be drastically reduced. For example, our 88,000-square-foot facility in Barcelona was built and opened for business 10 months after we purchased the land.

Reaching Customers

From an operational point of view, the Spanish self-storage market varies little from that of other countries. However, referrals seem to play a larger part in attracting customers than in more northern European countries. The average length of domestic customers' stay is slightly shorter than those of our Northern counterparts, but this may be because of the novelty of the product. Its also necessary to cater to "Spanish hours" and allow customers access until well into the night; an efficient access-control system should eliminate any potential problems.

All in all, operating self-storage in Spain has much to recommend it. The people are friendly, the sun shines most of the time, and if you can find the sites or properties, the frustrations are no more than in any other country. And if you cannot, theres always mañana.

Serge Kaoune, a French national, is the co-founder and country manager for Spain of Easybox Self Storage. A pioneer of self-storage in the Italian and Spanish markets, he has been involved in the industry since 1996, mostly in France with Abacus Self Storage, and as an operations manager for Access Self Storage. Easybox operates six facilities in Barcelona and Madrid, Spain, and Milan and Rome, Italy. For more information, e-mail [email protected].

This month, I gathered real estate experts to discuss the state of self-storage in the Southeast. Lets hear what they have to say about their respective cities and regions. Our panel includes: Bill Barnhill, Omega Properties, Mobile, Ala.; Dale Eisenman, Midcoast Properties Inc., Hilton Head Island, S.C.; Kathleen OBrien, Wexford/OBrien Associates, Arlington, Va.; Chuck Shields, Beacon Commercial Real Estate, Conshohocken, Pa; and Frost Weaver, Weaver Realty Group, Jacksonville, Fla. While Barnhill also works in Alabama and Mississippi, his responses below refer to the Florida Panhandle. Shields area covers New Jersey and Pennsylvania, but his following responses refer to the Delaware market. My comments are in italics.

As you look back at the last two years, what do you see as the primary reasons owners sell their self-storage properties?

Barnhill:

Owners generally sell to complete a 1031 exchange into another property or due to changes in their life. Sometimes they are planning retirement or simply want to have freedom from day-to-day involvement in managing the operation.

Eisenman:

The reasons vary, of course, but usually some life eventsuch as retirement, relocation or reallocation of assetsseems to precipitate a property coming to market. Sometimes a commercial property that was a good fit for an owner in the past no longer suits his investment objectives. An owner may want to diversify among other types of properties, or convert some of his equity to a more liquid investment.

Potential buyers often ask why an owner is selling, as if to suggest that if it was a good property, the owner would not part with it. Thats a flawed assumption. The buyer should be asking why he should buy the property. If the investment fits the buyers objectives and parameters, it should be pursuedregardless of the sellers situation. If the property has some negative issues, the buyer will discover those as he investigates the opportunity. So, in a nutshell, sellers sell when the timing is right, based on their unique circumstances.

OBrien:

Owners have made the decision to sell for the traditional reasons: The time is right due to a life change, such as a move or retirement. In addition, there are owners who have perceived such high demand for self-storage they believe their class-B or even class-C property will attract strong investor interest.

Shields:

Buyers have told me life changes were the reasons owners chose to sell. The main reason was retirement, with the breaking of partnerships as the next cause. This has been my experience in other areas as well.

Weaver:

Owners have decided to sell their self-storage properties for some of the following reasons:

• Developers/entrepreneurs have built their facility and leased it, but dont enjoy the day-to-day operations. They prefer the process of creating value, taking the equity they have created and duplicating the process. These are our industry risk-takers.
• Privately owned and operated facilities are relinquished due to a family death, divorce, split partnership or retirement.
• Investors or owners realize interest rates are most likely going to rise, which could have a negative impact on the value of their properties.

I cant add much to what our troops in the field are saying, except that if you want to sell, prices are the highest they have ever been. Unless you believe interest rates will drop farther, this is probably a once in a generation (maybe lifetime) chance to sell at high prices.

Do you think the potential rise in interest rates will affect cap rates in your area? What effects on property values do you foresee?

Barnhill:

Rising interest rates will obviously affect cap rates, though not necessarily in a linear fashion. Values should moderate somewhat due to higher cap rates. On the other hand, inflationary pressures could cause an increase in rental income.

Eisenman:

Yes, to some degree, but the long-term rates have been fairly stable recently, so it may be a bit early to predict. As long-term rates increase, we may see a dampening of demand, particularly if it is associated with tighter underwriting by lenders. However, rates and lending criteria are only part of the picture. Values will remain attractive if the industry continues to offer reasonable returns to investors. If we find ourselves in an overbuilt market with softening rents, rising interest rates will have a chilling effect on demand and value.

OBrien:

Yes, of course. The bottom line is always going to be return on investment. The lower interest rates allow more aggressive cap rateseven 7 percent and 8 percent. However, a rise in interest rates will be followed by investor intolerance for lower cap rates.

Shields:

The thinking of some owners is interest rates will stabilize during the first half of the year, with the second half being uncertain due to the war and state of the economy. The feeling is if there is any movement, it wouldnt be more than 1 percent; and values would definitely be affected, but Im not sure to what degree.

Weaver:

A rise in interest rates should increase cap rates, as there is a direct correlation. As rates rise, I would expect to see a decline in values, all else being equal.

Once again, the team is on the money. It is simply axiomatic that higher interest rates cause cap rates to rise and prices to decline.

What are the primary reasons buyers are interested in self-storage as opposed to other real estate investments?

Barnhill:

Self-storage has become a highly desired investment since many investors view it as a low-maintenance property type with ease of entrynot to mention the excellent return self-storage affords.

Eisenman:

Self-storage has proven to be a consistent performer over time (with the possible exception of about six months after 9/11). It offers solid returns and seems to be less vulnerable to fluctuations in the economy. Additionally, because a self-storage property has multiple tenants, no one vacancy has the same impact on cash flow as one might experience in retail, office or industrial real estate. While it shares that characteristic with multifamily properties, it requires less of an investment to make a unit available for the next tenant.

When I speak with potential buyers who are new to the industry, I find they often think the industry is a way to make easy money. I try to explain the home-run opportunities are more rare than they once were, but the industry offers solid singles and doubles for those who are willing to be diligent and serious. Many newcomers underestimate the management component of self-storage and fail to see the associated risks with an under-managed or poorly managed facility.

OBrien:

I think the initial reason is the perception that self-storage requires less management. This is not true, of course. However, I think many investors are attracted to self-storage because it does not require an ongoing capital investment after the initial construction. In addition, the tax advantagesmainly with the shielding of passive incomeare quite appealing.

Shields:

Self-storage is considered one of the best investments available. Expenses and management are very reasonable, and the returns can be substantial. In addition, financing has become more favorable.

Weaver:

I have had contact from potential investors who have been actively involved in the ownership of other types of real estate and are now seriously considering self-storage.

Some of their reasons are:

• Simplicity of management.
• Higher cash-on-cash return.
• Lower risk due to a lower breakeven occupancy.
• Fewer construction and maintenance issues.
• Fewer employees to manage.
• Strong demand for resale opportunities.

I think one of the overlooked advantages of self-storage properties is the low cost to turn over a tenant. There is no tenant finish, no leasing commissions, not much cleanup, and not a lot of administrative time and effort. Over the life of most real estate properties, these can really add up, diminishing property value.

Is overbuilding a consideration for buyers in your area? If so, describe their concerns.

Barnhill:

Potential buyers are prudently aware of the overbuilding issue, and most are using market studies as part of their due diligence. An overbuilt market can emerge in a relatively short time, depending on changes in supply and demand.

Eisenman:

Overbuilding is always a consideration for buyers and sellers and will continue to be so. Our industry will benefit from sharing more information that allows better, more informed decisions. While some owners or operators feel they need to safeguard their rental rates and occupancy for competitive reasons, the more enlightened members of the industry recognize that failing to share accurate information can lead to destructive overbuilding, market cannibalization and lower rents.

OBrien:

The population in the mid-Atlantic region is growing in such leapsand the growth projections are so greatthat many buyers are quite eager to enter the market.

Shields:

Overbuilding always seems to be on self-storage owners minds. Some Delaware owners feel New Castle County and some of the beach areas could see some overbuilding but, at the present, it is wait and see as to how the population grows in these areas over the next few years.

Weaver:

Overbuilding has primarily taken place in the larger markets where you have a strong presence of national and regional developers. The smaller markets are continuing to experience good occupancy and stability. Most owners in these markets are reluctant to raise rates for fear of attracting new competition.

Great returns on real estate properties always create overbuildingits just a matter of how much. The overbuilding fires always burn brightest with the oxygen of low interest rates. It is the paradox of real estate that moderation in interest rates is the best position in the long term, even though low interest rates can look really great in the short run.

Is now the time to sell? Rate the local selling environment on a scale of 1 to 10 (with 10 being the most favorable) and explain your answer.

Barnhill:

Now is a window of opportunity to sell, since demand for self-storage is strongand interest rates are still low. Combine this with a low capitalgains tax rate and the opportunity to defer gains through a 1031 exchange, and the result is the best time to sell in the past decade. A rating of 9.5 is not too high.

Eisenman:

Its time to sell only when a sale fits the owners objectives and goals, no matter what the calendar states, interest rates suggest or the owner hears at an industry conference. The proper timing for buying and selling is unique to the individual or organization involved, measured solely by circumstances important to him. For some, now is absolutely the right time to sell, so on the scale, its a 10. Historically low interest rates, reasonable underwriting by lenders and attractive returns make it a good time for buyers to buy and sellers to sell at fair value.

OBrien:

Nobody has a crystal ball, and this is a question each owner has to evaluate. There are many concerns about what the Fed may or may not do; we would all like to predict what the capital markets will do.

Shields:

Some owners believe that self-storage values have topped out. If there is consideration to sell in the next 24 months, its probably better to sell now than later. If interest rates go up, it will be much harder to finance the projects at higher values. On the scale, Id say the rate is 7 to 8.

Weaver:

Unless an owner/investor plans to hold his property for at least five more years, now is the time to sell. I would say the rating is an 8. There is a strong consensus that interest rates are going to rise over the next few years. This is definitely going to have an impact on value. Most markets have sufficient excess supply, and rental rates are not going to offset this declineit would take at least five years for that to occur.

I agree 8 is the minimum rating and 10 may well be the answer. But if interest rates rise, that number will fall to 5 or lower.

Michael L. McCune has been actively involved in commercial real estate throughout the United States for more than 20 years. Since 1984, he has been owner and president of Argus Real Estate Inc., a real estate consulting, brokerage and development company based in Denver. In 1994, he created the Argus Self Storage Real Estate Network, now the nations largest network of independent commercial real estate brokers dedicated to buying and selling self-storage facilities. For more information, call 800.55.STORE or visit www.selfstorage.com.

Although it developed slower than in the United States, the demand for "niche self-storage" in Italy and Switzerland has become a matter of fact, supported by statistics and data monitored by the most important associations and magazines in this business sector. The service is becoming increasingly popular among the public, and the high population density creates a growing need for space and ongoing self-storage development. Self-storage became a reality in Italy in 2000, when Casaforte Self-Storage, a developer in Italy and Switzerland, opened its first facility in Varese, Italy.

Analyzing Demographics

The business model used by European operators follows the example set by major American players. But entering a new market requires adapting the product to fit local consumers' needs. In Italy and Switzerland, the decision to open a facility in a certain location and offer specific services requires careful profiling of target groups in the area. Its necessary to identify all potential customers in terms of age, mobility, income, marital status, and social and cultural condition, which means analyzing the key factors of consumer demand.

When defining target groups, its important to remember mobility is primarily related to occupation (including retirement), marital status, education and family growth. Marital status and age are particularly important for identifying potential customers, as singles and individuals between 18 and 40 years of age are the most likely to move and change their lifestyles. Even housing conditions influence people's behavior. For example, those who rent have fewer ties to their homes and are more inclined to relocate and use self-storage.

The survey and study of the local population's habits, lifestyle and housing conditions are important. When a facility is opened in a particular location, it can be beneficial to align with cultural and social foundations of the community: universities, social-research institutes, schools and public-information centers. These can provide data on consumers' needs, assisting in the customization of the storage service.

For a concrete analysis of data regarding various groups, its useful to study the official demographic findings of local census and administration offices and organizations in charge of urban planning and estate matters. Census data helps us identify the existence and range of different groups and verify the relative importance of each compared to others.

For example, administrative data allows us to compare the number of residents who rent vs. homeowners and, depending on local urban planning, evaluate the commercial potential of each group. For new businesses, the census can be equally useful in verifying the types of enterprises in an area, the sectors of greater importance, and their distribution. Other business-data sources include local industry organizations and associations, training centers and trade-administration offices.

Niche Service

Offering a "niche service" that suits the needs of a particular group can provide a competitive advantage, especially in countries like Italy and Switzerland, where the market is smaller and the constant increase of operators and structures is approaching the saturation point. In these areas, storage operators have had to diversify the product to satisfy the demand for a unique, high-level service. The demand comes from segments of the public that, although a minority, create an excellent opportunity to establish specialized, exclusive offerings within self-storage.

In Italy, a call for luxury space comes from the fashion and art industries. Particularly in Milan and Rome, famous and less-notorious stylists and designers in the fashion, accessories and interior-design sectors use self-storage to stock old collections and store surplus, pattern books and equipment. Art collectors, connoisseurs, dealers, antiquarians, importers and exporters also need special environments in which to store art and related objects.

In Rome, high prelates and politicians are increasingly turning to self-storage to preserve their goods, which aren't necessarily of great value. Most of the time, stored goods include personal items that only have esteemed status because of their sentimental value. Customers need to store these prized possessions is answered by self-storage, including elegance and complete customer care.

The same specialty markets are also being served in Switzerland, where the high incomes of a large portion of the population define the demand for distinctive, luxury self-storage. Switzerland is one of the most politically stable and economically efficient European countries. The Swiss are a linguistically and culturally diverse group that demonstrates national pride and an adherence to values. All of this must be taken into account when considering how to approach the self-storage market. Customer service must be superlative, and staff must be perfectly fluent in the language. Of all the services that can be offered through a self-storage facility, transport and removals has the greatest impact.

In Italy and Switzerland, self-storage structures are multilevel. Interiors are extremely tidy and provide climate-control. When possible, old, prestigious buildings are renewed, remodeled and converted to a self-storage use. Their architectural refinement satisfies functional and space-optimization standards as well as design criteria.

To succeed in the diverse and demanding Italian and Swiss markets, you have to be observant, pragmatic and trustworthy, but also stylish and refined. You have to take into consideration the needs of the public majority, but also those special expectations of exclusive target groups.

Sabrina Tordo is the marketing and communication manager for Casaforte Self Storage S.p.A. For more information, visit www.selfstorage.it.

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Casaforte: A Leader in Luxury

Casaforte Self-Storage's primary objective is to supply private citizens and businesses with storage space of varying size in which to store goods for flexible periods of time. In terms of structure, management and technology, the company operates its facilities according to methods created by the major U.S. and European players, but manages to maintain its Italian flair. In addition to two Swiss storage sites, it has facilities in the Italian cities of Basel, Corisco Milan, Florence, Foggia, Lugano, Milan, Padua, Rome and Varese. Casaforte is also planning facilities in Bergamo, Busto Arsizio, Genova, Pistoia, Sanremo, Saronno, Treviso, Verona and Vicenza.

Current occupancy rates range from 60 percent to 90 percent, depending on facility maturity. In light of this data, it appears self-storage is becoming more of a social phenomenon in Italy. When developing facilities, Casaforte decision-makers cooperate with professors in the fields of communication-science, history and literature. This collaboration has become vital to obtaining fundamental information on people's taste for the service and the best way to communicate and convey promotional messages to the public.

Casaforte refers to its facilities as "hotels for things to communicate the level of service the company provides. Its fashionable and professional staff has impeccable manners and is capable of accommodating every kind of customer. Managers personally visit their most important clients at their homes, where they explain and describe the service and stipulate the contract. Facility visitors are welcomed by helpful, friendly employees who are always available to answer questions and find the best solutions for customers needs.

To complement its self-storage offering, Casaforte provides specialized services. For example, the company hosts on-site art exhibitions, featuring young artists in the local area. While visitors appreciatethe works of art, they associate them with the context of self-storage. Thanks to Casaforte, many works have been moved from dusty attics and dark basements to bright, pleasant environments where they may be enjoyed by their owners and visitors alike.

Through its strategy of analysis and development, Casaforte is becoming more prevalent, not only as a leader of the self-storage sector, but as a skilled operator providing a luxury service. The company's product satisfies the needs of those markets interested in brand image and style in addition to efficiency and security.

France is home to 112 storage facilities serving the country’s population of 62 million. The stores are owned by 31 different companies, though 58 percent of the market is controlled by only three corporations: Access, HomeBox and Shurgard. The market is geographically concentrated, with 54 percent of facilities in the Paris area.

The average self-storage customer in France isn’t much different from that of the rest of Europe. Private individuals account for 80 percent of tenants, and business clients comprise the remaining 20 percent. Most tenants are male—60 percent—although the female market is growing. Eighty percent of customers live within 5 miles of their store.

Market Growth

France lags behind the United Kingdom in terms of self-storage development. The U.K. market was born five years earlier, so its public has a better awareness of the service. Studies show that in French cities where storage facilities operate, only 5 percent of the population understands the product. Despite money spent on marketing each year, awareness grows slowly. So far, this is the biggest challenge the French self-storage industry faces.

From 2000 to 2002, the French market greatly expanded, primarily due to development by U.S./U.K. companies. But in 2003 and 2004, most of these large corporations stopped development and growth slackened. This year, for the first time in the country’s short self-storage history, French-owned companies have led the pack on self-storage openings. Among the new generation of French corporations, Box Avenue and Annexx stand out with ambitious development plans.

Philippe Peyrot is president of Annexx SAS, a French self-storage company, and founder of Self-stockage.info, an online publication about self-storage in Europe. For more information, visit www.annexx.com and www.self-stockage.info.

Five years ago, a small group of pioneers realized the Austrian and German populations lacked space to store their possessions. Having the vision to see self-storage as the natural solution, they boldly launched Self Storage-Dein Lager GmbH. The troupeconsisting of Martin Gerhardus, an independent consultant and general manager for a paper-merchant group, and long-time entrepreneurs Heinrich Hoyos and Herbert and Harry Hildis banking on the industry's economic potential. Austria's population is just over 8 million and Germany's is 82 million, yet storage facilities in these countries are few and far between.

Dein Lager (translation: "your storage"), headquartered in Vienna, Austria, opened its first facility in 1999. Since then, the company has opened five additional facilities: one in Graz, Austria, another in Munich, Germany, and three in Vienna. The storage operation is managed by Gerhardus and Hoyos.

Each facility has a net-rentable area of 6,000 square meters. Customers receive their own keys and security codes and can access their units from 6 a.m. to 10 p.m., 365 days a year. Security measures include video surveillance, alarms and a security service. Facility corridors are designed to be wide and well-lit, allowing customers to easily and safely handle their goods.

Good-Site Hunting

As in all EU countries, suitable storage sites in Austria and Germany are difficult to find, Gerhardus says. "Our sites were selected for visibility, accessibly and our assessment that the locations were good." Except for one, all Dein Lager facilities are in residential areas, making them attractive to local communities. Newer facilities are on major streets with a minimum traffic count of 20,000 cars per day. Only one is in a warehouse area.

Five of the company's stores are new builds and one is a conversion. The greatest challenges to constructing a new facility are time, money and nerves, Gerhardus says. "When we find a location, it takes us four to six months to open the store," he adds.

Regulations, too, can be an obstacle. In Austria, rules governing development are very specific. In Germany, however, which has four levels of self-governmentstate, federal state, district and municipalguidelines can be unclear. For the most part, municipal agencies govern matters related to local communities. "Of course, we follow all regulations and, therefore, have high costsbut no real problems," Gerhardus says. It was to his group's advantage that local residents did not object to the projects.

Though local architects are not familiar with the requirements of self-storage, Gerhardus and his partners were able to assemble an experienced design team. Their partitions and doors were furnished by Steel Storage Systems Inc. Locks, security systems and lifts were supplied and installed by local companies.

Drawing Customers

Though there are no contending self-storage businesses in its market, Dein Lager faces a lot of competition from the transport and storage industry, Gerhardus says. The companys primary marketing mediums include leaflets, signage and the Yellow Pages. Its website, www.selfstorage.at, is another good customer draw.

To expand its base of potential customers, each Dein Lager facility offers ancillary products and services, such as the sale of popular retail items like boxes and tape. The West Vienna facility offers upscale storage for wine. In addition to temperature and humidity control, it features a separate entrance, and each unit is individually alarmed. The East Vienna facility offers business storage, called "self office."

Future Growth

The founders of Dein Lager have one driving philosophy: to be the market leader. Growth and development of the company and the industry as a whole is necessary to bring that objective to fruition. "We plan to establish another four facilities to reach our final goal of 10," says Gerhardus, who intends to build one more facility in Vienna and three more in Munich.

"The growth of self-storage in Austria and Germany will be slow," Gerhardus admits. Nevertheless, Dein Lager sees the potential of the industry and hopes to break even after seven to eight years as it educates the market on the service self-storage provides. For more information, e-mail [email protected].

Q: A tenant injured herself at my facility and expects my insurance company to pay her medical expenses. The woman lost her balance and fell on the stairs while exiting the rental office, but the steps and handrail were painted yellow for visibility and are in excellent physical condition. There was no evidence of water or any other material that could have caused her to slip. Will my insurance company be forced to pay for her injuries, even though her accident was not caused by negligence on my part?

A: Unfortunately, accidents happen, and its not always a direct result of negligence on the insureds end. Your self-storage insurance policy includes medical-payments coverage (also known as medical expense), which is designed to cover expenses incurred for bodily injury caused by an accident with no regard to fault. Most policies include medical expense with a limit of $5,000 per occurrence, which can be increased to $10,000. The coverage will pay for first aid, medical, surgical, X-ray and dental, ambulance, hospital, professional nursing and even funeral servicesas long as the costs do not exceed the insurance limits.

If the tenant decides to seek additional damages, your self-storage insurance policy should respond with a defense. If it turns out you are legally liable for her injuries, your insurance should pay out the sums for which you are obligated, up to the limits stated in your policy.

Q: I am considering a guard dog for my storage facility. I read that having a guard dog roam the property at night is a great and inexpensive way to deter crime during off-hours. Will this affect my insurance policy?

A: When deciding which security measures you will incorporate at your facility, first determine if you are trading one liability exposure for another. While a guard dog may deter some crime, professional offenders will quickly disarm a dog, while novices may attempt to outrun it. If they get mauled, your facility could face litigation.

A guard dog may make your facility less attractive to your insurance company, which could increase your premium or decline to renew your policy. If you use a dog, your insurance provider will probably ask you a variety of questions, such as what breed of dog it is, where you plan to keep it during business hours, how you plan to avoid tenant contact and if you have warning signs posted on your property. As some breeds are more volatile than others and can be unpredictable, most insurance companies prefer you keep the dog away from customers, especially children.

If your insurance provider decides to insure your facility with a guard dog on the premises, you will probably be asked to sign an animal-exclusion form to keep or obtain coverage. This contract excludes coverage for property damage, and bodily or personal injury that occurs as a result of any animal owned, maintained or leased by you, your facility or your employees.

Some would argue that dogs who attack would-be burglars are only doing their job, but that doesnt mean the injured party or his family will not attempt to sue. Litigation could be very expensive, and since your policy may exclude coverage for acts by animals, you could be left with quite a bill.

Q: My insurance agent recommended I purchase hazardous-contents removal coverage as part of my policy. Isnt this already covered under pollutant cleanup and removal?

A: Pollutant cleanup does not cover expenses to legally remove hazardous contents such as tires, oil, gasoline or chemical biohazards left in a unit by a tenant. Hazardous-contents removal is an optional coverage that will reimburse you up to certain limits for expenses you pay to remove such items. (Please note this option does not include any related fines or legal fees you may have to pay.) Even a small disposal job can cost thousands of dollars, so check your insurance policy to see what type of disposal coverage you have or may want to consider purchasing.

This article is a guideline to aid in minimizing risk in self-storage facilities. The information it contains is intended to be of general interest and does not address the circumstances of any particular individual or entity. Nothing in this document constitutes legal advice, nor does any information constitute a comprehensive or complete statement of the issues discussed or the laws relating thereto.

Amy Brown is part of Universal Insurance Facilities Ltd., which offers a comprehensive package of coverages specifically designed to meet the needs of the self-storage industry. For more information, or to get a quick, no-obligation quote, call 800.844.2101; visit www.universalinsuranceltd.com.

Over the past five years, the Canadian self-storage industry has grown considerably, in some ways mirroring the boom the U.S. market experienced 15 years ago. This can be partially attributed to the maturation self-storage has undergone to meet public demand, but also to local market conditions.

After the crash of the markets in 2000, REITs and other real estate funds experienced a major influx of capital as investors moved their holdings into more traditional brick-and-mortar investments. Low Canadian interest and bond rates (approximately 100 basis points lower than U.S. rates) also spurred industry activity by allowing investors to acquire facilities at lower capitalization rates, which translated into higher sales prices. These factors have contributed to creating current opportunities for self-storage investors in Canada.

Differences by Region

Self-storage growth has not been uniform across Canada, and there remain some startling discrepancies in the price per square foot of rentable space from region to region. In Vancouver, British Columbia, storage owners are averaging $20 per square foot. In comparison, operators in Montreal, Quebec, are collecting considerably less, at roughly $12 per square foot. More tellingly, Montreal facilities are charging the same rental rates as those of similar quality in Sarnia, Ontario, two hours southwest of the Greater Toronto Area (GTA).

Taking into account industrial land values in the respective cities— $370,000 per acre in central Montreal and $50,000 per acre in Sarnia—regional differences become all the more evident. By looking at the macro view of the Canadian market, a new investor can gain a better understanding of what the future will hold for self-storage in the specific city or market he has selected. For example, it’s easy to see the Montreal market has room for an upward shift in price per square foot, whereas the Vancouver market has likely come close to reaching its natural price ceiling.

Different Canadian regions require varying investment strategies. For example, a business model that works in Edmonton, Alberta, may not be suitable for Toronto. The GTA is the most modern and developed Canadian market, and land has become increasingly scarce and expensive. This scenario has led investors to concentrate on conversion projects and create A-class facilities to prosper in the competitive marketplace.

In Calgary, Alberta, however, most new facilities are ground-up developments on the periphery of the city where the land is affordable and readily zoned. As new subdivisions expand the boundaries of this growing area, investors will reap the dual benefits of an increased clientele as well as rising land values. Both provide ideal circumstances for long-term investment.

Montreal, Canada’s second largest market, presents its own, unique investment opportunity. Traditionally low rental rates and the perceived difficulty of entering a predominantly French-speaking market have kept many outside investors from moving into this major city. However, with the maturing of the industry across Canada, Montreal’s low per-square-foot average indicates an opportunity for strong return on the initial investment, as rental rates are certain to increase.

The Birth of Corresponding Business

The storage boom in Canada has spurred the growth of businesses related to the development and management of facilities. These periphery enterprises eliminate many of the stumbling blocks once present in establishing and operating self-storage in Canada.

In recent years, financiers have emerged who focus on securing funding for self-storage as one of their core services. Their experience in the industry facilitates the acquisition of capital, as most lenders are wary of unfamiliar businesses. Also, their willingness to provide financing for sums below the minimum loan amount of most financial institutions allows smaller investors the opportunity to realize their development projects.

Consulting for self-storage is also becoming readily available to owners and investors, offering services such as feasibility and demographic studies—crucial components to any analysis of an investment opportunity. Insurance brokers who specialize in self-storage can be found in most metropolitan areas, tailoring policies to specific facilities and providing advice on reducing the number of annual claims. Finally, there are organizations that specialize in training facility staff in sales techniques, while others offer products specific to the retail side of the industry.

Unclear Indicators

A clear distinction between the United States and Canada in terms of self-storage real estate is the reluctance of Canadian owners to openly list their properties for sale. Last year in the GTA, only one facility was publicly listed. In the entire province of Alberta, two were listed in 2004. In neighboring Saskatchewan, there were none. These numbers in no way reflect current availability in these markets. To the contrary, industry growth is spurring many self-storage transactions, but the majority of deals remain off the open market.

There are many reasons for this peculiarity of the Canadian self-storage business community, including cultural business practices and the relative smallness of the industry when compared with the United States. The fact remains, however, that newcomers to the Canadian market are at a distinct disadvantage because of this lack of accurate indicators. They do not have a true picture of the opportunities available. As the storage market grows and prospers, the demand for facilities will increase, and with it the need for more precise information.

David Anderson and Michael Foy are partners in Anderson Foy (AF), the only brokerage firm in Canada specific to self-storage. They have been in the self-storage and commercial real estate businesses for a combined 22 years. AF offers comprehensive consulting and advisory services, development opportunities, financing, and management sourcing. Committed to helping individuals, corporations and asset managers maximize their self-storage potential, the AF team is expert in pricing assets, investigating financing options, structuring joint ventures, site selection, feasibility studies and target marketing. For more information, call 877.567.3800; visit www.andersonfoy.com.

They had little idea they would become partners in a successful self-storage enterprise when they met. Though Robert Kortright and Greg Porteus had ambition, drive and a wealth of business experience, their backgrounds were profoundly diverse.

Porteus attended college and became a New York state trooper. After retirement, he ran a successful construction company for several years. Kortright grew up in a mobile home in Kingston, N.Y., and began working at age 10, selling tire tubes on the roadside. At age 16, he purchased his first real estate. While in his twenties, he owned and ran a successful tire company. But Kortright dreamed of having a storage facility on the property adjacent to his boyhood home. In 2001, he received municipal approval to build one on his 3.3 acres.

It was not an easy process for a young entrepreneur to gain the towns approval for a state-of-the-art self-storage facility, Kortright says. And he had a problemhis financial resources were exhausted. I started this project when I was 29 years old, spending every cent I made.

Believing he had no choice, Kortright put the property on the market. He was on the verge of selling to a local storage facility when he met his future partner. Porteus says he saw a future in an industry with only a 4 percent failure rate nationwide, especially when combined with Kortrights unique ideas, great location and approved plans. Within days, he secured financing for the development of Accessible Self Storage.

What the Market Needs

Accessible Self Storage sits at the juncture of two main roads, one-quarter mile from State Highway 9 in Wappingers Falls, N.Y. Opened in October 2002, the facility comprises three double-story, steel-and-concrete buildings containing 600 units. Monthly rates range from $60 for a 5-by-5 to $310 for a 10-by-30. Accessible has the technology and design to provide custom-size units for clients, and there is outside storage for RVs, boats and trailers.

Research showed that to best serve clients in New Yorks wildly fluctuating climate, the self-storage trend was toward 100 percent climate control. Porteus and Kortright incorporated heat and air conditioning into all the facilitys buildings, including the downstairs, drive-up units.

Building 1 is named The Whitely Building in memory of a U.S. Marine killed in action in Vietnam. The ground floor features easy access to units with exterior roll-up doors. The second story has four entrances, all with wide staircases, and a centrally located freight elevator that loads from the outside at ground level. Building 2, opened in June 2003, is slightly larger with the same design.

The design of Building 3, unveiled last December, ensures more convenient moveins. Each ground-floor unit has an exterior and interior door, so customers can access their units from inside the building if they prefera real bonus during severe winter weather. The second floor also has two hallways, and center units have doors on either side.

Greater Expectations

Self-storage is an industry that must cater to customers demands, Kortright says. The most important thing is customer service. If you concentrate on customers needs and making it easy for them, you will always be full, he asserts. To this end, Accessible strives to provide more than people expect.

Customers within a 40-mile radius of the facility are moved in free via the companys pick-up service. An enclosed trailer, complete with blankets and hand trucks, is dropped off at a customers home, business or another storage facility. Once loaded, Accessible picks up the trailer and parks it next to the customers unit or the freight elevator.

The sites security includes a high-tech CCTV system that allows the owners to view facility activities via any Internet connection. Exterior lights are set on timers and interior lighting is motion-activated. The coded entry gate allows 24/7 access, and entry and exit times are logged. The facility is kept immaculate, not only for safety but visual appeal. And in winter, snow is promptly removed using the facilitys own equipment. We want to ensure our clients peace of mind and security, Porteus says.

Customers can request to have Accessible staff accept outside deliveries on their behalf, to be kept for pickup in the main office or directed to the unit. We have changed the way people store their valuables, says Kortright.

Running the Show

With the increase in property costs, the partners chose to eliminate an onsite managers apartment and use all available land area for storage. A high-tech technology system allows them to run the facility with four employees, while Kortright and Porteus handle most of the repairs and facility care.

Before hiring, the partners conduct careful and thorough interviews with candidates. New hires work daily with the owners. Certain standards are instilled, including excellent customer service and the importance of maintaining an immaculate work place. And, of course, employees must understand the importance of putting on a smile when a customer comes through the door.

Accessibles marketing program consists of direct mail, Yellow Pages advertising and door-to-door campaigns. Kortright says the facility is also enjoying the rewards of word-of-mouth. Our customers are our best advertisement, he says. The facilitys second most effective marketing medium is employees with excellent phone skills and pleasant-sounding voices.

On the Horizon

Although Korthright believes his area is saturated with self-storage, he and Porteus plan to expand if the opportunity presents itself. The partners see the industry growing and changing to meet customers needs and believe self-storage should be a pleasant, hassle-free experience. According to Kortright, All the advertising in the world wont make a business a success without wowing clients with unsurpassed customer service.

Construction Corner is a Q&A column committed to answering reader-submitted questions regarding construction and development. Inquiries may be sent to [email protected] .

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Q: In the past two months, I've had two keypads at my storage facility knocked over by trucks. What is the best way to protect my keypads at the gate?

Jack in Albuquerque, N.M.

A: That depends on the type of keypad and how it is mounted. Keypads are commonly installed on a gooseneck and bolted to a concrete slab at the gate. In this situation, you can install bollardssteel posts filled with concretearound the keypad to protect it from vehicle-related mishaps. Sometimes a keypad can be mounted on a wall or gate post, making it a less likely target. When placing your keypads, keep convenience and equipment safety in mind. From a customer-service perspective, it's best to put them where tenants can access them without getting out of their vehicles; but this will obviously require additional safeguards.

Q: Is there any way to prevent an access system from being damaged by lightning or electrical surges?

Nancy in Wichita, Kan.

A: Nothing will protect equipment from a direct lightning strike, but there are several measures that can prevent damage from electrical storms and surges. Lightning only needs to strike a nearby area to send surges to electronic components, so check your power supplies for safety. All equipment and computers should be plugged into a surge protector. Some security vendors offer devices with a grounding plug that will divert harmful electrical charges to the grounding source of the building. If you live in a lightning-prone area, ask your supplier what protections it can offer.

Unfortunately, while a surge protector can help, electrical charges do not need to go through power wires to cause damage. They can flow through any conductive source, such as an unprotected data wire. Higher-end keypads have special protectors for data wires that can dissipate an electrical charge before it damages the keypad circuitry. Check with your vendor to see if this is available.

Rod Davis is the installation manager for QuikStor, a provider of self-storage security and software since 1987. For more information, visit www.quikstor.com.