Market fluctuations, seasonal demand, emerging technology: self storage operators have a lot of changing factors to keep up with.
But among all the different market dynamics in the industry, competing with real estate investment trusts (REITs) might be the most pressing.
These publicly traded companies have vast resources that independent operators often can’t match. And they keep growing.
So if you’re an independent operator, how do you compete? Thankfully, there are ways that local facilities can outmaneuver the enterprise competition.
Here are a few methods for competing against REITs when they set up shop in your local market.
90% of Americans believe that shopping local positively impacts their community. To differentiate yourself from REITs and leverage this bias in your audience, lean into the fact that you’re local.
Naming your facility after a submarket is an effective way to pull this off. For most properties, the majority of tenants live within a three to five mile radius. Adding the name of your submarket (or a nearby landmark) immediately signals that your business is a part of the local community.
(A submarket can be a suburb or neighborhood within or outside of a bigger city.)
REITs can’t copy this strategy because they’re locked in to the name of their parent company. Not only can this type of branding make your facility more appealing to locals, but it can also be a major advantage in Google search.
On a national level, SEO favors large businesses. Google typically ranks older, more established websites higher than new ones.
But in local search results, smaller businesses can outrank corporations if you play your cards right.
Maximizing your visibility in local SEO requires an optimized Google Business Profile. It’s relatively easy to set one up. All you need to do is provide Google with information about your facility—operating hours, phone number, website url, etc.—and you’re good to go.
What really makes your profile stand out (and rank higher) is positive customer reviews. So set up a process to drive as many reviews as possible, and you’ll start to see your rankings rise.
If you named your facility after a submarket, this could be your time to shine. The vast majority of Google searches for self storage use two phrases:
For example, Metairie is a suburban community outside of New Orleans. The search term “self storage metairie” has over 400 searches a month.
If your facility includes “Metairie” in its name, you’ll be best positioned to rank for those local searches and appear highest in local SEO results.
Another way to advertise that you’re local is to spend some marketing budget on events in your community.
Sponsor the local softball league and hang some signs at the field advertising your facility. Partner with your local chamber of commerce to host an event at your property. Attend a meeting of the local rotary club and offer discounts to the members.
There are a number of ways this strategy can manifest, but the steps are the same:
REITs are notorious for offering low promotion rates and then rapidly raising prices on tenants once they’ve rented a unit.
Naturally, this causes a lot of churn. And while the economics of this practice may work for REITs, they also create an opportunity for local operators to sell against this practice.
If a prospective tenant brings up REIT pricing during a phone call or walk-in visit, let them know that the promotional rate they’re seeing isn’t what they’ll be paying for long. It may seem cheap now, but it won’t stay that way.
Think of this tactic as jujitsu, where you use your opponent's strength against them.
Yes, REITs have the luxury of being able to churn customers, but that also creates a pool of people looking for self storage who don’t want to rent from them again.
It costs less to keep a customer than it does to earn a new one. This old business adage doesn’t apply to the REIT model, but it still does for most self storage businesses.
REITs can churn and burn customers because they share resources with a nationwide portfolio. If they lose money on their promo rates or experience high churn, they have the capital to persevere until things get better.
Still, raising prices through existing customer rate increases (ECRI) are a tried and true way to improve the revenue you bring in from current tenants. So you don’t want to totally abstain from the practice.
How do you balance profitability with churn? It’s all in the timing.
REITs aggressively increase rates early in the customer lifecycle, but a more balanced approach can yield more revenue without forcing mass move outs.
Our CEO Peter Smyth breaks down how to practice smart ECRI here:
The customer experience matters, and REITs have the capital to invest in security, automation, and other amenities that make a difference to tenants.
You don’t have to match every bell and whistle they offer, but you do need to understand what your customers care about.
To find out what your tenants really want, just ask. Send an email survey and ask what improvements tenants would like to see.
REITs typically over-staff their locations, so they have the manpower to answer and return phone calls and emails quickly.
Response time is the primary factor in how customers rate the service they receive, so to compete, you need to strive for same-day follow up. The more responsive you are, the more likely you are to close leads who call in looking to rent a unit.
Knowledge may be half the battle, but execution is just as important. If the tactics we’ve listed here seem overwhelming, it may be time to consider third party management.
Here are a few of the benefits facility management companies can offer when compared to working with REITs:
Working with third party management companies is often cheaper than partnering with REITs. At White Label Storage, we work on month-to-month contracts so we’re always incentivized to keep improving.
If you’re considering selling to a REIT, remember it means giving up your brand. Your property will be folded into the army of other facilities under the corporate brand name.
With third party management, you get to keep your brand alive and continue building an audience of loyal customers that know your facility’s name. There are also significantly less requirements for signage or CapEx investments.
REITs only make a fraction of their revenue from management. They’re more interested in acquiring facilities than partnering with owners to manage properties.
While REITs utilize data from macrotrends across their entire portfolio, good management companies will research your market and develop an understanding of what your individual facility needs. This can be a significant advantage when it comes to marketing or investing in new technology.
If you’re looking for some help to compete with REITs, schedule a free demo with our team. Discover how we’re helping operators across the country maintain their occupancy and increase profitability even when REITs enter the market.
