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ISSUE: 2nd Quarter 2009
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PORTABLE OPPORTUNITIES
Looking At New Revenue Streams
by Jennifer Leclaire
When you think of mobile self-storage, you probably think of PODS or Mobile Attic. But there’s an entirely different side of the industry—a side that’s been around for decades longer—that offers opportunities or self-storage operators searching for new revenue streams in a down economy. It’s containerized storage and it offers a different set of benefits for companies looking to break into the mobile self-storage business. The containerized storage-style portable
storage containers come straight out of the containerized shipping industry—an industry that’s more than 50 years old. Malcolm McLean came up with the idea to use a standardized metal box to move cargo by land and sea. The portable storage industry uses the same types of containers that McLean made famous worldwide to help businesses set up mobile offices and leverage additional on-site storage space—and with a level of security industry gurus insist residential mobile self-storage containers can’t match.
Containers proved ideal for transporting global shipments, but they are also ideal for manufacturers, contractors, warehouses, auto dealerships, retail outlets, schools and colleges, or municipalities that need extra storage space for inventory or supplies. These ground-level storage containers can serve as a temporary or permanent storage solution.
These containers can also be refrigerated to store temperature-sensitive materials, although experts don’t recommend it in a self-storage application.
“Containerization did more than transform the cargo industry—it created a practical way for companies to store their goods temporarily or permanently on site,” says John Finnessy, CMP, executive director of the National Portable Storage Association (NPSA), a nonprofit membership association dedicated to the advancement of the portable storage industry. “The portable storage industry has carved out a new niche for these ship ping containers as a storage solution that promises convenience.”
The Portable Storage Advantage
While the opportunities differ on a market-by- market basis, there are potentially lucrative revenue streams for self-storage owners who decide to add portable storage containers to the static storage mix. Specifically, Phil Herndon, sees three of them. “Portable storage offers a flexible way to expand on-site rental space, the ability to store customers’ contents in a PODS-style fashion, and to store containers that customers themselves own,” says Herndon, Past-President of the NPSA and President of Container Solutions, Inc., a portable storage vendor in Walnut Creek, Calif.
The real opportunity is for self-storage operators who have available land—and plenty of it. Portable storage is a space intensive play. Even though you don’t have to build warehouses in which to store portable storage containers like you would with the more prevalent mobile storage model, you still need green space to host them.
“You can’t work in a very small area and pick these containers up with trucks and forklifts without crushing or damaging something,” says Dale Payne, President of the NPSA and Founder of A AAmerican Container Leasing, LLC, a portable storage vendor in Tampa, Fla. “If you plan to move these at all, then you’ll need an acre or an acre and a half just to get started. If your business takes off, you can quickly outrun an acre. But you need the space to maneuver.”
The real opportunity is for self-storage operators
who have available land—and plenty of it.
Portable storage is a space-intensive play.
No matter what avenue you choose to generate additional income, the clear advantage for self-storage operators is an existing customer base that is familiar with the benefits of storage and the possibility of generating extra income without a self-storage facility-sized construction investment.
“Portable storage is a very stable revenue stream once you get it up and running,” says Payne. “It generates an ongoing income like self-storage operators are used to, but it’s a different business than static self-storage. It’s not an overnight money-maker and there are issues with delivery and pick up, unless you choose just to store the containers on site without those services.”
Expanding Without Building
The opportunities for self-storage operators to leverage portable storage containers are many. Perhaps one of the more attractive opportunities in a down economy is using containerized storage to expand a traditional self-storage facility’s unit inventory without engaging in long-term building projects for which you may or may not be able to secure financing.
“Portable storage is a flexible way to expand available on-site rental space,” says Herndon. “It’s a cheaper, simpler alternative to bricks and mortar expansion.” Herndon says portable storage expansion may be the only option in some cases. Some municipalities, he explains, won’t allow you to lay a foundation and construct a permanent building because of hazardous wastes, flood plains, or power line obstructions.
Growth patterns in a community might also dictate a quick solution to tap into revenue opportunities. “Let’s say that you put in your mini-storage five years ago, and then the next thing you know is you have a 250-unit apartment complex that’s built right next door and everybody wants small units and you never built the small units,” Herndon says. “You can turn to portable storage if you have extra land and ramp up quickly for the demand.”
If you decide to leverage portable storage containers to expand your facility without investing millions in construction costs, you have to be cautious about how you position those units. In other words, you need to educate the consumer on the differences between static and portable units.
“With traditional self-storage, you have temperature-controlled units,” says Matt Eagle, vice president of Eagle Leasing, a trailer and container leasing company in Orange, Conn. “If you are renting portable storage containers on site, you need to be clear with people not to put any paintings or irreplaceable artifacts or anything else that requires cooling or everybody loses. But landscaping equipment, construction equipment, bicycles, and other items are perfect for on-site portable storage.”
You should also dress it up. That means good quality containers, new paint that ideally matches your existing self-storage structures. Herndon says you can even put siding on a portable storage container. “You can put roofs or some sort of dress-up structure on the container,” Herdon says. “Discuss it with an architect. We regularly get customers who come in with an architect and decide how they will transform the containers into something more aesthetically pleasing than a large steel box.”
The Portable Storage Unit Mix
So you’ve decided to use portable storage to expand your facility and increase your revenue stream. How do you approach the unit mix? First, determine your needs and your customers’ needs. If your facility is constantly short on the larger-sized units, you may opt for a 20-foot portable storage container. But containerized storage also comes in 10-foot and 40-foot sizes.
“Some people will put palletized goods in a portable storage container and fill it from head to toe,” Eagle says. “Other people will decide whether they want to be able to access what’s inside frequently. They may want to consider a double-door container where they can access it from both ends. The other thing to consider is the pathway from left to right. I typically recommend 40 footers because if the container is closed you can spread your items around and there’s still room for expansion.”
If you opt to expand your facility with portable storage units, you can stack them—but not too high. Stacking them too high can make it a pain for tenants to access their units and even create liabilities. For that reason, if you choose to stack the units, Herndon says you need to have the capability to un-stack them when tenants want to access their stored goods.
That being said, second-story storage may work well for items that tenants aren’t going to access much, like vehicle storage. “I see a move in the self-storage industry to store old vehicles and boats as a way to increase revenue,” Herndon says. “Self-storage operators can use extra land on site to store vehicles in containers safely.”
Portable Or Mobile?
Mobile storage has its place, and has perhaps stolen the lion’s share of the public view with big brand names like PODS and Mobile Attic, but portable storage industry vendors say there are plenty of reasons to opt for containerized storage over mobile storage. First and foremost, containerized storage is less expensive. But there’s also a quality aspect.
“Mobile storage containers tend to have a translucent roof, which heats up the container. If anything hits it very hard, you’ll shatter the whole roof and it will leak,” Eagle says. “The translucent roofs also break down over a period of time, discolor, and are prone to leaks. Some of these containers also have fiberglass sides. If you hit it, it breaks and you can’t fix it, so moisture enters in.”
Containerized portable storage is constructed out of heavy steel and designed for exposure to salt water environments for 10 to15 years. They are designed to withstand transport by huge cranes banging into each other on the open field. Honan says they are nearly indestructible. “The only way you can get into a portable storage container is with a high-powered torch, and if somebody has that type of equipment, they are going to get into anything,” he says. “With the containers that are fiber glass construction, you could probably bang through it with a big hammer.”
Payne agrees. Portable storage units are stronger and more readily available. There’s no franchise fees involved with getting into portable storage, and you can get them from multiple sources so there’s no reason to be locked into a single supplier. “It seems like different mobile self-storage operators have different lift and storage systems,” Payne says. “With a portable storage container, you have more flexibility and the containers are a long-term asset that pay for themselves in about three and a half years, if you choose to buy them.”
Many portable storage vendors are willing to form
strategic alliances with self-storage operators
that would benefit all parties.
You can’t talk about storage without mentioning security. So, how do portable storage containers stack up on the security front? Beyond the high-powered torch scenario, portable storage units are secure. The roll-up door on a portable storage unit is on par with a traditional self-storage unit. A more secure option would be swing doors on a portable storage unit.
“Portable storage containers are made of steel and they are by and large secure. A very strong lock will help, and with the video surveillance on self-storage sites, that helps, too,” Eagle says. “You also have to take into consideration the area. If it’s in a very affluent area, security isn’t as big an issue as if it’s in the middle of Downtown Chicago. I’d recommend a heavy-duty Enforcer lock.”
Forming Strategic Alliances
For self-storage operators who don’t want to take on risks in a down economy, portable storage also offers answers. Many portable storage vendors are willing to form strategic alliances with self-storage operators that would benefit all parties. For the self-storage operator, it reduces the risk of investing in a critical mass of containers typically required to make a profit.
“Self-storage operators can re-rent units that belong to a portable storage vendor,” Honan says. “If a local beauty shop wants on-site storage, we don’t provide that and the self-storage operator may not have room. So the self-storage guy could call us and have a container delivered to their property and rent it for $150 a month. The portable storage operator makes $100 a month, the fixed operator makes $50 a month, and the customer is still getting a great deal.”
Partnerships between portable storage and self-storage operators also address common challenges for both sides of the table. Portable storage companies typically don’t do on-site storage and self-storage operators typically aren’t equipped for pick up and delivery. That makes for a good synergy that benefits all parties— including the customers.
Finding A Good Partner
So, how do you find a reputable portable storage partner to align with? The NPSA is a good place to start. The NPSA has a strict code of ethics for its members, and encourages containerized storage vendors to uphold the highest business standards.
“It’s very important to do business with somebody who you can go back to if you have a problem. It’s all about having a relationship,” Eagle says. “If somebody gives you the lowest price, but they are not there in the future or forget about you when something goes wrong, it’s not worth the aggravation and cost. So look for reputation, the quality of the equipment, how far they stand by you, and the responsiveness.”
Honan suggests looking for a portable storage vendor that has its own delivery fleet, is local, and can respond within 24 to 48 hours to a delivery request. In his experience, when customers have a need for portable storage containers, they want it nearly immediately. Beyond timing, the condition of the equipment is also important.
“You want to partner with a vendor that has good looking equipment that’s in good working order,” Honan says. “You don’t want to partner with somebody who has rusty, old boxes with doors that don’t work because that would be a reflection on the self-storage operator. You don’t want to portray a poor image of your company.”
Going It Alone
If you decide to get into the portable storage business without a partner, you’ll have to deal with financing issues to purchase the containers, as well as the forklifts and other gear you’ll need to move them. But you first need to decide if your market will adopt it. It’s one thing to offer containers as an option and know your partner will deliver one to your site within 24 hours. It’s another to purchase them yourself.
“I would buy some units from the local market, test it out, and see how it works,” Payne says. “You’ll probably find that it starts growing and you’ll soon need 10 or 15 units. Self-storage operators have the advantage because they aren’t depending solely on container rentals to sustain the business. So they can afford to grow it organically.” What about financing? Containers cost about $3,000 each, but can also become a tax write-off for the company even if the containers don’t generate much income in the first year.
“You can handle purchasing portable storage containers in a number of ways as far as depreciation and capital is concerned,” Herndon says. “You can lease-purchase containers like you would a car versus going to the bank like you would for bricks-and- mortar construction.”
With all the pieces in place, how do you get started generating a buzz for your new ancillary income stream? Market to your built-in customer base, for starters. With a strong location, some signage, and a little advertising, Payne says static storage operators should be able to generate a following.
“Good-looking, well-painted, well-maintained boxes are your best word of mouth. It’s the best on-site advertising. But you do have to be patient with it,” Payne says. “You can spend a crazy amount of money putting out salesmen and advertising, but ultimately if you offer good boxes and good service, the word will start spreading and the business will slowly but surely build.”
Jennifer LeClaire is a freelance writer based in Hallandale Beach, Florida, and a regular contributor to the Mini-Storage Messenger, Self-Storage Now!, and Mobile Self-Storage Magazine. Her clients include The Associated Press, The New York Times, and CBS Television/Winstar Communications.
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