True Competition in Self-Storage

In the self-storage industry, it’s easy to assume that a market filled with facilities is a competitive one. However, not all competitors are created equal, and understanding the difference between true competition and mere presence is key to making informed decisions when entering a market. This article delves into the distinctions between various classes of self-storage facilities, from Class A to Class F, and explores why markets that seem saturated may not be as competitive as they appear.

The Spectrum of Self-Storage Facilities: From Class A to Class F

Self-storage facilities are typically categorized into classes based on their quality, amenities, and overall appeal to customers. Here’s a breakdown:

• Class A Facilities: These are the premium players in the market. They are often newly built or recently renovated, offering modern amenities like climate control, advanced security systems, 24/7 access, and exceptional customer service. These facilities are usually located in prime areas, attracting higher-end clientele and commanding premium rental rates.
• Class B Facilities: While not as luxurious as Class A, Class B facilities are still in good condition. They may be slightly older but are well-maintained, offering basic amenities like security, clean storage units, and reasonable access hours. These facilities cater to a broad range of customers and are often found in both urban and suburban areas.
• Class C Facilities: These facilities are typically older and may show signs of wear and tear. While they still offer basic storage solutions, they often lack the advanced amenities of higher-class facilities. Security may be less robust, and customer service can be hit or miss. Class C facilities usually attract cost-conscious customers.
• Class D Facilities: Class D facilities are often in poor condition. They may have significant maintenance issues, outdated security systems, and limited amenities. These facilities are often located in less desirable areas and cater to customers looking for the lowest possible price.
• Class E Facilities: These facilities are on the brink of being non-functional. They may have severe structural issues, minimal security, and a complete lack of amenities. Class E facilities are often on the market for potential redevelopment or in the process of being phased out.
• Class F Facilities: At the bottom of the spectrum, Class F facilities are typically abandoned or in such disrepair that they are not viable as storage solutions. These facilities may still technically exist in the market but do not pose any real competition.

Why Markets May Not Be as Competitive as They Seem

When analyzing a self-storage market, it’s essential to differentiate between the sheer number of facilities (competitors) and the true competition. A market may appear saturated with facilities, but if the majority are in lower classes, the competitive landscape might be more open than it seems.

Uncompetitive Competitors

Many markets are filled with facilities that are poorly maintained, lack modern amenities, and offer subpar customer service. These uncompetitive competitors may occupy physical space in the market, but they do not pose a significant threat to well-managed, high-class facilities. For instance, a Class A facility with premium amenities and top-tier service is unlikely to lose customers to a rundown Class D or E facility, even if it’s in the same area.

Customer Preferences and Market Demand

Data from industry reports supports the notion that customers increasingly prefer higher-quality facilities, even if they come at a premium. According to the 2023 Self-Storage Almanac, facilities with modern amenities and strong customer service consistently achieve higher occupancy rates and command higher rental prices compared to older, less-maintained facilities.

Additionally, a report by IBISWorld highlights that demand for Class A and B facilities has been growing steadily, with these categories accounting for over 60% of the industry’s revenue in recent years. This suggests that while there may be many facilities in a market, only a subset truly meets customer expectations, reducing the actual competition.

Location and Accessibility

Another key factor is location. A well-located Class A facility can dominate a market, even if there are numerous lower-class competitors nearby. Customers prioritize convenience and accessibility, often willing to pay more for a facility that is easy to access and offers a superior experience.

The Real Competitive Landscape

When considering entering a new market, it’s vital to conduct a thorough analysis of the competition, not just the number of competitors. By understanding the different classes of facilities and recognizing the saturation of uncompetitive competitors, investors and developers can uncover opportunities in seemingly crowded markets. In many cases, the game for customers is far more open than it appears, particularly for those offering high-quality, well-managed facilities.

If you’re considering developing a self-storage facility but are concerned about market saturation, reach out to us. We can help you navigate the real competitive landscape and identify where the true opportunities lie.