On Sunday, New Jersey self-storage operators will begin charging a 7 percent sales tax on their units. They can only wonder what it may cost them in lost rentals.

In July, Gov. Jon S. Corzine proposed a 1 percent increase on the existing state sales tax as well as an additional levy on previously untaxed services, including self-storage, tanning salons, tattoo parlors and health clubs. The latter goes into effect on Oct. 1. The tax expansion is expected to raise $332 million annually.

Mike Lackland, owner of Lackland Self Storage, which has 21 New Jersey sites, told Associated Press he has lost about a dozen customers who wanted to avoid paying the tax. In today's Asbury Park Press, other operators shared their woes, stating the new tax has created a lot of additional accounting work and confusion on behalf of customers.

"Customers think the fee is from us, which it's not," said Irene LeBlanc, manager of Harbor Mini-Storage in Eagleswood, N.J. "All they know is that they have to pay more out of their pocket." LeBlanc feels the facility will lose customers as a result.

Mary Mitchell of Freehold (N.J.) Self-Storage says the tax most hurts those on fixed incomes, particularly senior citizens who have downgraded their residences and use self-storage to house their goods and memories.

The New Jersey Self Storage Association has filed a law suit with the Federal Court in Newark, N.J., alleging the tax violates constitutional protections. Assocation President Chris McGrath said, "The state has selected a very narrow sector of commercial real property and applied a sales tax to it." For information about the association's efforts and how to help, operators should visit www.njssa.org.

Nov. 1 marks the official deadline for the Inside Self-Storage Scholarship Program for 2007. Interested parties are encouraged to apply for one of five $2,000 grants, good toward tuition at any accredited college or university.

The ISS Scholarship Program, initiated in 2001, encourages the educational pursuits of students closely affiliated with self-storage. Entrants are required to work in the industry or have immediate family members employed by self-storage or related companies. The scholarship funds, however, can be used to study any designated field.

To qualify, applicants must be at least 17 years of age; show proof of at least one-year affiliation with the self-storage industry; and plan to attend a college or university in 2007. Only one entry per family will be accepted.

Applications must be received no later than Nov. 1. They may be submitted via fax to 480.281.6038; by e-mail to [email protected]; or by mail to Inside Self-Storage Scholarship Program, P.O. Box 40079, Phoenix, AZ 85067-0079. All submissions should be typed or very clearly printed.

The scholarship committee will select winners by Dec. 31. All recipients will be notified in writing by Jan. 30. A formal announcement will be made at the Inside Self-Storage Expo in Las Vegas, Feb. 20-23, at the Mandalay Bay Resort & Casino.

For more information or to download an application, visit www.insideselfstorage.com/scholarships.

Guardian Self Storage is a co-sponsor of the annual coat drive for Dutchess Outreach Inc., a Poughkeepsie, N.Y., organization that assists needy individuals and families. Guardian is collecting adult and children's winter coats at its facilities in Dutchess, Orange and Ulster counties through Oct. 31. Last year, 1,500 coats were gathered and delivered to those in need. For information, call 845.454.3792 or visit www.dutchessoutreach.org.

The issue of tenant bankruptcy will be addressed in a formal seminar at the upcoming Inside Self-Storage Las Vegas Expo, Feb. 20-23, at the Mandalay Bay Resort & Casino. On Wednesday, Feb. 21, industry legal expert Jeffrey Greenberger will coach attendees on what to do when a customer files bankruptcy, including the immediate actions to take and methods of recourse. Hell also cover recent changes in bankruptcy law and answer important questions such as whether a tenant is supposed to pay rent during his bankruptcy and if an operator is allowed to continue with lien proceedings.
 
Greenberger practices with the law firm of Katz, Greenberger & Norton in Cincinnati, which primarily represents owners and operators of commercial real estate, including self-storage. He is the legal counsel for the Ohio Self Storage Owners Society and the Kentucky Self Storage Association as well as a regular contributor to Inside Self-Storage magazine and the tradeshows it sponsors. For more information, visit www.selfstoragelegal.com.

Vehicle storage is a fast-growing niche in the self-storage industry. Many articles address design, construction and operations, but little has been written about measuring demand for RV and boat storage. Too much time and money is at risk to build without knowing a market awaits.

The science of determining vehicle-storage demand is still being developed, but through experience, weve learned to first ask key questions:

• What is being stored?
• Who is the customer?
• What bundle of features make up the product?
• What is the best location for vehicle storage?
• How big is the primary market?
• How do you determine demand in your primary market?
• How many competitors are there, and what do they offer?
• How can your facility best compete?
• What is your absorption potential?

Stored Items

RV and boat storage encompasses motor homes, travel trailers, campers, off-road vehicles, jet-skis, snowmobiles, boats, utility trailers, commercial trucks and trailers, industrial equipment, antique and collectable cars, and personal vehicles stored when owners travel for extended periods. Sometimes law-enforcement agencies store impounded vehicles at commercial facilities. Just about anything on wheels (and some without wheels) can be found at an RV- and boat-storage facility.
 
Customers

Its possible to measure some owner classes. These include RV owners, boat owners, trailer owners, numerous businesses, car collectors and restorers, people who might be transferred overseas for months at a time, government agencies and private organizations. Depending on the services and amenities they expect, the groups can be further broken down.
 
Storage Features

What will you offer vehicle-storage tenants? Every customers needs are different, making it impossible to bundle facility features in a one-size-fits-all fashion. Renters decide whether to store at your site based on a number of qualifiers:

• Unit size
• Protection from environmental elements
• Security features
• Unit accessibility
• Convenience of location
• Vehicle-related services
• Price
• Lease terms

Some tenants are OK with uncovered storage; others expect the works­enclosed, climate-controlled space with valet services.

Finally, vehicle storage is usually teamed with traditional self-storage or auto-boat services. Some customers will patronize your site for the convenience of storing vehicles with household belongings andif you go the distancehaving their RVs serviced at the same place.
 
Location

Whats a good spot for vehicle storage? While there is no magic answer, several preferred locations have emerged:

• Resort- or destination-oriented locales, which cater especially to RVs and boats
• Suburban and small towns, accommodating a range of vehicles
• Urban areas, which usually attract vehicles other than RVs

When shopping for sites, keep your eyes open for property that has good visibility, easy access and the right price.
 
Market Size

Make sure you set up shop in a locale attractive to visitors and booming with potential tenants. For example, resorts often draw customers from a wide market. Tenants might live hundreds of miles away, picking up their RVs at the beginning of the season and storing them at the end. Many own two homes.

Suburban and small towns serve more localized markets but may draw people within a 10-mile radius. An urban vehicle storage facility is likely to serve a much smaller primary market areaprobably no more than five miles in radiusdue to congestion.

The primary market is defined as the geographic region that attracts 65 percent to 75 percent of customers. The locations of major competitors, road patterns and natural features will also influence the size and shape of your primary-market area.

The next step is to investigate the number and type of vehicles owned by residents in the area:

• RVs, by type and size
• Boats, by type and size
• Personal recreational vehicles (jet-skis, snowmobiles, etc.)
• Antique vehicles
• Personal utility trailers

Vehicle- and boat-registration data should be available at state departments of motor vehicles or licensing. You will have to apply the information to your specific market.

Also research the number of vehicle owners who get transferred overseas each year (military, corporate). Finally, track down companies in industries using commercial vehicle storage through ZIP code, and inquire about local government agencies and institutions (churches, schools) that may need to store buses or other vehicles.

Once we have these numbers or reasonably good estimates, the next step is harder: What is the probability these potential customers will actually rent a storage unit?

This is difficult to estimate because research into vehicle storage is in its infancy. Using national statistics, the Self Storage Almanac estimated 1.9 million RV/boat commercial parking bays associated with self-storage facilities in 2004. The RV Industry Association and National Marine Manufacturers Association tallied approximately 25 million RVs and recreational boats in the country during the same year.

The ratio of parking bays to RVs and boats was 7.6 percent, which could be used as a rough estimation for RV and boat owners in any area to use commercial storage. Unfortunately, that figure isnt entirely accurate.

The good news is vehicle-storage demand exceeds supply in many areas across the country. Plus, demand is growing, based on increased sales of vehicles and growing restrictions on where they can be parked. Therefore, the number of RV and boat owners using commercial storage is probably around 11 percent; the proportion of landscaping and other big-vehicle companies that store may be much higher.

Another tactic is to take the calculated demand for RV and boat storage (11 percent of the markets RV and boat inventory) and assume it represents about 80 percent of the total demand within the market. That is, the additional 20 percent comes from other vehicle types. This ratio could go up or down based on specific market characteristics and location.

While far from perfect, this approach does provide a means for estimating demand but should be cross referenced with a competitive supply analysis of the market, county or region. Also keep in mind that 25 percent to 35 percent of the demand likely originates from outside the primary market.
 
Competition

A facility up to 12 miles away can have an impact on your market. Your chief competitors will be listed in the Yellow Pages and Internet. Map and visit them. Note the quality of the location, ease of access and visibility. What kind of security is provided? What kind of storage (open, covered, enclosed)? Whats the mix? Rents, services and amenities? What is the occupancy rate? What are the strengths and weaknesses of the facility?

Conversing with managers, try to learn about the seasonality of demandlook at vehicle type and unit sizeand also whether they know future competitors in the area. And, dont forget to check with local planning and zoning offices about other projects on record.

Remember the tools for projecting demand are still crude. If all competitive facilities are full and the projection shows the area is oversupplied, some adjustment is needed. Just be careful not to adjust so much that you prove more demand than what exists. This takes a lot of prudent judgment.

If your in-depth research reveals the market is saturated or a new facility is in the works to soak up overflow, youll have to move on and find another area ripe for development. Hopefully, youll find a hole in the market to fill. Then, analyze what kind of facility you should build, the mix, services and pricing.

The important question to ask is: Are there any niches or services the competition has overlooked? If your location, quality and services are superior, youll probably lure some tenants awaymaybe 10 percent to 20 percent. The remainder will come from outside the primary market.

In the end, what market share should you expect to capture? Plan for at least an even share distributed among all the competition20 percent for five facilities, for example. Just dont overlook the other players size and strengths. Some may have the capacity to seize only 10 percent, whereas you could potentially nab 50 percent.

Does that mean you will? Not necessarily. It depends on location, facility quality and rents as well as the intangibles of marketing, salesmanship and management.
 
Jim Stratton has been providing market research and feasibility studies for real estate developers since the early 1980s. A substantial part of his work is in the storage industry. For more information, call 504.866.7696; e-mail [email protected]; visit www.stratton-research.com.

Grubb & Ellis|BRE Commercial, a provider of integrated real estate services, has moved its North San Diego County office to the new Kelly Corporate Center IV at 1000 Aviara Parkway, Suite 100, Carlsbad, CA 92011. The company s phone and fax numbers will remain the same: 760.431.4200 and 760.454.3869, respectively.
 
Over the last several years, Grubb & Ellis has grown to more than 170 professionals and has increased market coverage, expanding from three to five offices throughout Southern California. The Carlsbad office has seen a dramatic increase in representation of commercial projects and high-growth companies in the burgeoning North County, which has driven its need for a larger and more technologically advanced work environment.
 
The new facility encompasses more than 14,000 square feet that includes team workstations and hotel quarters for temporary use by visiting professionals and clients. State-of-the-art technology, such as video and teleconferencing capabilities, have also been incorporated. For more information, visit www.brecommercial.com.

Inside Self-Storage sends condolences to Beacon Realty Capital employees as they mourn the passing of colleague and friend, Dick Kerwin, who died on Sept. 20 while traveling in Little Rock, Ark. He served as a senior vice president of the firm.

Dick joined Beacon in 1995 and was known for his warmth, great sense of humor and driving focus on addressing the needs of others. He brought true expertise to his professional life, supporting the self-storage industry through his involvement in the Mortgage Bankers Association of America and as a director of the Chicago Real Estate Council.

Dick is survived by his wife, Trudy; children Brian, Kelly, Hillary and Heidi; and grandchildren Meghan and Maeve.