We ended 2012 with the highest occupancy we’ve ever had at our self-storage facilities. We can only attribute this to the fact that Americans are relentless in their pursuit of buying and storing things. With more self-storage in the U.S. than the rest of the world combined, we are clearly the #1 consumer of material possessions, and need a place to put those. And self-storage makes complete sense. With the average price of a home in the U.S, standing at around $100 per square foot – and up to $1,000 per square foot in some areas -- the best place to put your excess belongings is in a self-storage unit instead of a room in your house. Of course, another reason that our occupancy is so high is that we offer fair prices and easy-to-use basic layouts where the customer can simply pull up to their bay with their car or truck. If you can find these type of facilities at good prices, then buy them, as the next trend in America is retirees downsizing, and they’re going to need a lot of storage as there are 10,000 baby boomers retiring per day right now.
Memo From Frank & Dave
How The Baby Boom Is Going To Affect Self-Storage
After World War II, between the years of roughly 1946 to 1964, there was one of the largest groups of newborns in U.S. history – roughly 77 million babies that represent 27% of the U.S. population. This group is referred to as the “baby boomers”. Economists have watched this segment of the population with particular interest, because it is so large in size that, as it has progressed through its lifecycle, it has created giant levels of supply/demand issues. As it heads into retirement, it will ultimately put so much pressure on the Social Security and Medicare systems that it may jeopardize their survival. But what is the net effect of the baby boom on the self-storage industry?
A giant need for self-storage
It is projected that 60% of baby boomers will move from their current home as part of their retirement, and in almost all cases will be downsizing to smaller accommodations. As a result, there is a tremendous amount of personal property that will need to be stored. Like most Americans, this group has collected an enormous amount of personal possessions, many of which are very important to them and cannot be sold. If only a subset of this group rented a new self-storage space, it would virtually wipe out all existing vacancy in the U.S. Even those who never before needed a self-storage unit, will find themselves with no other options as they sell their 2,000 sq. ft. home and move into a 1,000 square foot duplex, condo or apartment. And there are 10,000 baby boomers per day retiring and looking into downsizing their housing.
They can afford it
One thing is certain about the baby boomers – they are a very financially strong demographic. Indeed, it is estimated that around 67% of the total assets in the U.S. are held by this group. Can baby boomers afford self-storage? Absolutely. When it comes between keeping those family heirlooms and Christmas decorations, they will have no problem is putting that extra $100 to $200 per month for a self-storage unit in their budgets.
They will need storage for a long, long time
One unique factor about the baby boomers, as opposed to prior generations, is the gap between their retirement years (gauged by the U.S. government at 65 years of age) and the life expectancy (which is around 80 in the U.S. currently). For nearly two decades, the baby boomers will require self-storage space to meet the needs of their new lifestyles. This is great news for self-storage facility owners, as this trend is not a short-term fad, but a long term demand.
Why we have grown to prefer “stabilized with upside deals”
Going back to the Odessa deal, you can make $1 million with a simple low-risk park, or you can do it with a highly risky, complicated transaction in which you have to fix some extremely expensive problem such as a failed packaging plant, or completely renovating 50+ homes. In that type of deal, you shoulder giant risk, and have a horrible return until the park turnaround is complete. In addition, a non-stabilized park is unable to obtain a loan, and even if the seller carries the paper, the capital intensive turnaround will require huge amounts of cash from the buyer. Assuming that both deals end up at a 12% cap rate, and a 20% cash-on-cash return, then the end result is the same in both deals. So why take the difficult road and not the simple one? Even more importantly, the risk level of the stabilized with upside deal is far lower and, like stocks, the return on risky deals should be higher, yet they often are not.
The biggest news story in the U.S. in the coming years is the retirement of the baby boomers. And this story will have giant implications – to the good –for the self-storage industry. Indeed, we may be on the verge of the next big boom in the industry.
Self Storage Home Study Course
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Basic Color Theory - And Why Public Storage Signs Are Orange
Have you ever seen the game in which you stare at a color for 30 seconds and then stare at a sheet of white paper and see a different color? The reason this works is that the brain reacts to colors in an unusual way – it seeks out the opposite to the color that it sees. Don’t believe me? Then just grab something brightly colored off your desk and try it out. I just stared at a yellow high-lighter for 30 seconds and then stared at a sheet of white paper and saw purple.
Why this is important
If we know that the brain seeks out the reverse color to the color it sees, then we have an important piece of marketing data. As Americans, we are awash in advertising signs and materials. To break through that glut, we know we need to stand out from the crowd. So, based on this theory, we should be able to stand out if we can be the opposite to the predominant colors that the eye sees. Some major advertising agencies, for example, will try to figure out the “tone” of certain magazines (the average of the color family of the ads ) and come up with the opposite to this group, so their customer’s ad will stand out from the pack.
So what’s the color that most self-storage facilities are competing with?
If we assume that the human eye seeks out the opposite to the predominant color it sees, then what is the main color that you see when looking around while driving? That’s pretty easy – green (trees and grass) and blue (the sky). Unlike a magazine, the colors are the colors of nature, and consistently so. If you look at a color wheel on-line, you’ll immediately see what the opposites are to green and blue.
And that’s probably why Public Storage signs are orange
That’s right -- the opposite to green and blue is red and orange. And it’s not just Public Storage that chose this color family. Virtually every major American chain that has roadside stores has chosen this color family in their signage, including McDonalds, Wendy’s, Texaco, Jack-in-the-Box and hundreds of others. This was no accident. They have used these colors to catch your eye.
In conclusion: stay away from green, brown and blue
The moral here is that the absolutely worst colors for a sign are earth tones of green, brown and blue. Those colors disappear into oblivion when your eye scans the horizon. Although they may be more tasteful, they are more wasteful if your goal is to garner traffic and customers.