Self Storage Crowned this Economy’s Cinderella Industry

OKLAHOMA CITY – Self-storage companies seem to be the “Cinderella segment” of commercial real estate in a faltering economy, a national industry spokesman said Tuesday to the agreement of Oklahoma business operators. 

Even with unemployment rates and foreclosures rising, people are trying to hold on to their smaller possessions as they move from job to job or home to home, said Michael Scanlon Jr., chief executive of the Self Storage Association trade group, based in Virginia. 

“There are some countervailing forces that work in our favor in a down economic cycle,” Scanlon said. “People who are downsizing their houses or moving because of foreclosures are still keeping a lot of stuff in storage that might not normally be there. 

“So I’m knocking on wood, but we’re hanging in there pretty well during this economy,” he said. The typical occupancy rate for the industry hovers near 85 percent, which has been steady in the less populated parts of the country such as Oklahoma, he said. The greatest erosion in occupancy nationwide is in the suburban and inner-city markets. 

But in terms of revenue for those weaker areas, he said, “for those organizations that were able to raise rents leading up to this downturn last September when everything hit the fan, their revenues this year are about the same even though their occupancies may be down a little.”

Craig Bodenhamer, operations manager for eight Switzer’s Locker Room storage unit locations in the Oklahoma City area, confirmed Scanlon’s occupancy figures. 

“We’re trying to be sympathetic and not raise rates like we normally would at this time of year. So we’ve been affected a little that way,” Bodenhamer said. “But as far as not being able to get people to move in and keep our occupancy at a good level, we haven’t noticed too much of a problem.”  

“We’ve held our own, that’s for sure,” said Mike Sprall, owner of seven U-Store All operations in the Oklahoma City area. “Business is anywhere from equal to a little better over what it was last year. … I think it’s because so many people are relocating; that’s a good part of our business.”  

Self-storage units are usually rented on a monthly basis without locking a customer into a long-term contract, Scanlon said. If a renter fails to make timely payments or otherwise abandons stored possessions, the business owner can auction those items. Specific legal rights vary from state to state.

“We’re not seeing a huge increase in abandoned units,” Scanlon said. “Maybe going up from 1 or 2 percent up to 3 percent in terms of overall numbers. … But it’s not huge, like people might expect.” 

Local storage operators hedged their assessments of abandoned units. Sprall, for example, said his nonpaying customer numbers have been “surprisingly low. … We haven’t had that problem yet, although we may later on.” And Bodenhamer said, “A lot of times you won’t know that for certain until a couple months have passed. They might have been delinquent for a month, maybe with a history of delinquencies, and all of a sudden you can’t find them. So we may still discover that’s going on later this month or next. But that’s normally not a big deal.” 

Storage unit operators don’t look forward to taking possession of abandoned items, they said. Treasures are rarely left behind. 

“Whatever you find in there never makes as much money at auction as what they owe,” Bodenhamer said. “The purpose for an auction like that is normally just to get the unit cleared out so you can open it again for a new customer.”

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