Do More Webinar Series Session 1: Predict. Prepare. Perform.

DO MORE Webinar: PREDICT. PREPARE. PERFORM.

https://www.storable.com/resources/do-more-webinar-series-session-1/

Date: 8/6/2021

Host: Matt Beal

0:19

Thank you for joining us today. We’re really excited to be hosting our first webinar in this new series and frankly, we’re just very appreciative of each of you taking the time to come join us for this conversation this morning. But all right, let’s jump into today’s webinar.

0:34

Today, we’re going to be discussing some of the most impactful forces that were kind of facing as the storage industry. And, most importantly, how you can position yourself to address each of these forces. At Storable, one of our primary goals is to help operators navigate the self-storage industry, and provide them with the tools and resources, and insights that are necessary to position themselves for long-term success.

And so, we see conversations, such as the ones that we’re going to be having for today’s Webinar, as a really critical component in that strategy. And so, we believe that we’re uniquely positioned to help operators by providing that information, in that guidance that is needed to navigate. Whether it’s macroeconomic trends for industry specific market forces, and the self-storage industry, or just talking about how to learn, you know how to set up your business for long-term success. And so, there are a few different reasons that we feel that way.

1:25

The first is the breadth of our client base. So, we work with over half of the storage operators in the entire industry. And so, as such, we have so many conversations with operators that are large and small and operating in all different parts of the country, some of them operate nationally. And it gives us a really unique vantage point to understand what operators are concerned about, what they’re thinking about, and what they’re experiencing.

1:48

But we also personally have really, really deep industry expertise. So, you know, with our legacy brands, such as SiteLink, StorEdge, Storage Smart Bader, and SpareFoot, the teams that have come together to create the Storable team, bring with them a whole bunch of experience. Whether it’s marketing, operational, or data-driven expertise that we can use to help you guys navigate the shifts in the industry.

2:11

And lastly, it’s just the volume of our relationships. So, we also have very strong relationships with various industry associations and other vendors in the space to give their unique vantage point and to make sure that that’s accounted for in terms of how we’re thinking about the industry and how we are responding to these market forces.

2:28

And ultimately, we believe that the value in these webinars truly, though, lies in connecting with everybody that’s in attendance, right? The folks here. And being able to just understand each other, what everybody’s thinking about, and whether or not these are the things that you’re experiencing. And so we want to adjust our approach based on what you guys tell us that you’re hearing and what you’re seeing. So, I think this is easily the most familial and kind of supportive industry I’ve ever worked in, and I know for a fact, I’m not alone in that sentiment. I’ve definitely heard from a lot of people to come and join the self-storage industry. So we’re really looking forward to that kind of future collaboration as we bring this webinar series to life.

3:05

But, before we get into today’s content, I didn’t want to start with a quick personal introduction as well. So, my name is Matthew Biel, and I’m a Product Marketing Manager here at Storable. I’ve been in the technology space for a little bit over 10 years, but specifically, I’ve been focused on self-storage for about five and a half years.

So as part of my job at Storable, I work really closely with our clients to understand a few different things. One is their unique business challenges, and what they’re thinking about. How they’re thinking about the market, in general, and the kind of macroeconomic forces that are acting upon our industry. And then also, to ensure that Storable’s technology is actually helping address each of those challenges, and making sure that we can help you guys solve those things that you’re most worried about. So naturally, this kind of conversation, this kind of webinar, is something I’m very passionate about because I really enjoy hearing from you guys about how you’re thinking about the same topics. So again, Q&A is probably the best way, or leave any comments as we go. I’d love to hear what you guys are thinking as we go through today’s presentation.

4:02

But, an important question to answer is, “why now?” Why did we start this webinar series? What are we starting to see that we believe is important? And why do we want to help the industry?

So, we believe that the industry is, really frankly, at an incredibly important inflection point. And operators that are forward-thinking, and they’re trying to get ahead of these things, are going to be best positioned for success over the coming years, for what could be a couple of potentially tough couple of years. So, I want to walk through, just how we came to this inflection point that we’re discussing.

4:32

First is the COVID-19 health crisis. So a lot of the behavior that we’re seeing in the industry, and with our tenants, are consumers today, is a byproduct of how both we as a society and industry responded to COVID. And if you think back to last March, for example, there was a ton of uncertainty and change. There were so many adjustments we were having to make to, you know, ensure the safety and the health of both your employees and your tenants, while also keeping your business running, and providing that valuable experience, such as, contact lists, rentals, etc. are really good examples of that.

5:04

But we have started to see this return to normalcy. And so, as our lives have returned to that, it’s important to keep in mind that, you know, these adjustments, and these changes to the customer experience that we were discussing a moment ago, continue to be just as important, if not more important today. They’ve, they’ve kind of left us with these long-lasting behavioral impacts. Such as customers preferring, or in some cases, even, just, frankly, expecting digital forms of engagement over what would have been the traditional kind of physical forms in our industry. So, we’ll be discussing that in a little bit more detail here in just a moment.

5:39

But the market does continue to evolve, you know. There are other forces, some macroeconomics, some are just related to the storage industry, that continue to affect how you should be thinking about your operations. And so, the purpose behind today’s webinars, to kind of lay the groundwork for what we intend to be multiple conversations on these important topics, but most importantly, on how you can prepare to be successful in the face of them in the future.

So, in the coming months, we’re going to be hosting a lot of conversations on these things. We’re going to be hosting operators and subject matter experts, and vendors, and industry associations, on these webinars to also lend us their voice and hear how they’re thinking about all these different things as well.

6:21

Well, let’s jump into these four market forces that we’re going to be discussing. So, what are they? As I mentioned before, we’re having very regular conversations with all different types of clients, and vendors, and industry experts to be able to better understand how they’re thinking about the market and the forces that are acting on it. So, what I want to do right now is walk you through what each of those four main pillars are, that we see as the most important forces at this very moment.

6:45

First is this tenant shift to digital. So, you know, there’s a number of indicators that, again, consumers are either preferring or sometimes even expecting digital forms of engagement with your business. And so, this is one that we predict to be one of the longest-lasting impacts of the health crisis in the industry. This is one that, you know, the models open, and we’re moving forward in this way. And, this doesn’t, you know, kind of, revert back, at least we don’t suspect that it will.

7:07

But second is a supply crunch. So, folks that have been in the industry since, you know, 2015 are very familiar with the concept here, but the general idea is that the storage market currently does not have enough supply to keep up with tenant demand. And so this creates a unique environment that forces operators to kinda reconsider how they’re optimizing their business. And that’s a very different way that you view your business from, for example, the last two to three years.

7:34

But we’ve also seen labor shortages, so this is another one that kinda lingers from the health crisis. And it’s a little bit unclear, more so than the other two, how that one’s gonna play out right now. But whether they’re affecting either the cost of, you know, construction, if you’re thinking about building a new facility. Or if it’s resulting in just kind of difficulty staffing your current facilities, there’s a good chance that this one is impacting you here today.

7:57

And lastly, is this concept of growth via M&A. So, we’ve seen larger operators and REITs, in particular, that are growing their portfolios, almost exclusively through mergers and acquisitions. More so than we have historically at any other point in this industry. So we’re going to be breaking this one down, in terms of just kind of how we see it playing out in the long run, and what you can do to position yourself for success in the face of it.

8:19

So the first one I want to walk through is, again, this tenant shift to digital. So anecdotally, I think not even thinking about the storage industry for just a moment, I think this is one where everyone can just personally relate to. And so, the example I always like to point to is, you know, go back a year, go back 18 months, and how many of your friends, parents, and grandparents, even knew that Zoom existed, right? And now, just think about how many of those people, did you stay connected to, in some cases, even exclusively, in that exact way, throughout the health process. You know, we’ve seen this exact kind of transformation, this digital transformation across many industries. I’m sure you’ve been personally affected, such as, you know, retail and shifts to online shopping or telemedicine and communications, and so, people have kind of inherently just changed how they’ve interacted with technology.

But most importantly, we do see this behavior play out in the storage industry. And so I want to take a look at some demographic data that we pulled from the SpareFoot marketplace to kind of articulate this. So, in case you’re not familiar, SpareFoot is a product that we offer here at Storable that helps guide prospects who need storage to the facility or unit that best meets their needs. So we have had over four million reservations made to date, Which makes it pretty easily the single most accurate source of information when it comes to understanding across tech, behavior, and industry. And so what you’re seeing here, in particular, is a percentage year over year growth on the SpareFoot marketplace from before the health crisis to during the health crisis, broken out by age range.

And so there are two main storylines that pop here that I want to walk through. First is this group of 18 to 24 year-olds. And so, this is commonly just referred to, as, you know, the college crowd, right? And if you think through, again, this is a comparison of before the health crisis to during the health crisis. This one is pretty easily explained. Because if you think back to last March, and last April, there was a whole lot of confusion and uncertainty about whether or not colleges were going to be holding classes in person, or if they were going virtual. And for the most part, most places went to an exclusive virtual model. And so during those early spring or those late, spring, early, summer months, we saw a whole bunch of this crew start shopping for storage units. It’s significantly more, and you can see here, it’s almost a 50% jump, it was a really, really big jump.

I think that’s interesting, but I also think that the Millennial and younger crowd, they’re already using digital formats, they were just using it much more during this time. But the one that’s more noteworthy is these last two bars on the right there, the 55 plus crowd. So these are prospects that almost didn’t use digital forms of engagement at all before the health crisis, and during were, as you can see here, using it at a significantly higher clip and starting to adapt. But as I mentioned before, these digital transformations are happening across multiple industries and all kinds of different experiences. And so, you know, McKinsey and Co recently released some interesting information here that I thought I wanted to share as it relates to the broader e-commerce experience. So, this is not specifically the storage industry, this is e-commerce, across all industries. And what they found was that last year, there was a 17% increase in e-commerce.

11:27

So, it is absolutely critical that you’re providing that kind of online shopping and account management experience that they’re getting from all of their other different shopping experiences in different industries, as well. And so last year, we also did a webinar series on this as well during our COVID-19 response. And so, what we talked about was, how can an operator better position themselves to respond to the tenant shift to digital transformation? And we gave much more practical tips than we’re gonna go through today. I’m not going to go down that rabbit hole today, but there’s a variety of different services and technologies and different strategies that you can take to meet those needs. So I want to plug real quick, if you go to www.storable.com/resources, you can find all of those old webinars, of which there are some really practical tips for how to respond to stuff exactly like this.

12:15

So next up, I want to transition to a conversation on, again, the macroeconomic and kind of storage industry-specific market forces that operators are facing in both the short and the long term. So from a high level, there’s a number of reasons to believe that we’re going to be in a supply crunch over, frankly, at least the next year, if not even more. And, again, that means that supply is probably not going to be able to keep up with tenant demand, and that’s what we’re expecting. And so, those that have been in the industry for a while, this is again, something that is going to be very, very similar to 2015, if you recall back to kind of what that looks like. But, this COVID, this post COVID experience is going to be actually a little bit different, and we think it’s going to be compound and even more significant for a couple of different reasons. But the one I wanted to flag too is that coming out of this health crisis, I think the industry, we definitely talk to operators that believed they were anticipating a sizable number of the tenants that moved in during the health crisis to start moving out at some point earlier this year. But what’s interesting is that it has not been the case. And instead, we have kept all of those people we captured during the health crisis. And we have continued to have record-breaking demand. And so I want to walk through a few different views, and some interesting data that we can share to kind of articulate that point.

13:34

So first is, I want to look at occupancy percentages over the last three years. So what you’re seeing here is aggregated occupancy percentages year over year from 19, 20, to 21. And as you can see, 19 and 20 were both good and continued to have some significant growth there, but 2021 is really the story. You know, again, we have not seen nearly as many people moving out of the units, as we expect, and we’ve seen record-breaking demand on top of that. And so what’s ended up happening is we’re blowing occupancy percentages just out of the water when you look at it compared to the last couple of years.

It’s also worth noting that this is not visible in this chart, but if you take this same view and look at things such as, does this hold true in an overdeveloped and underdeveloped regions of the country from a self-storage perspective, the answer is, yes. Generally speaking, occupancy percentages are rising everywhere. So operators are kind of responding, you know, just as you would expect. You know, we, as you can see, we are seeing identical trends when it comes to price per square foot as we are to occupancy percentages. That makes sense, right? As occupancy percentages rise, operators raise prices to make room for new tenants and, you know, just keep that whole process rolling.

What’s interesting, though, is that there doesn’t seem to be any slowdown in sight currently. So, even compared to the occupancy percentage, you can see June is a massive jump here in terms of price per square foot that we’re seeing in aggregate, so if you’re not raising your rates and just thinking about that, you’re, frankly, you’re definitely leaving some money on the table.

15:02

And what we would typically see the industry respond to, and this is what we saw in 2015, how we saw the industry response, was by building additional facilities so that they can meet that increased demand. But that hasn’t been the case so far, for a number of reasons. But recently, there’s been rising construction costs. So, you know, what’s interesting is according to the National Association of Home Builders, we have seen both the price of lumber and steel rise over 300% year over year, compared to their prices. And so this puts a really big strain on construction budgets. And we’ve seen a lot of facilities either pause or halt projects as a result of this, if they didn’t already have their lumber and steel secure. So we have seen lumber prices start to drop over the last month, month and a half, and that’s great news for sure. But it’s also worth noting that, you know, commercial projects such as ours, are still having to compete with pent-up demand in the residential sector, which is sizable too. So this is one we’ll be keeping our eyes on this as we go forward. There are a number of factors that are kind of influencing these price increases, and so one ties into another topic we will be discussing momentarily, which is the labor shortage. So, you know, when COVID hit, many of the jobs that were in the lumber and steel supply chains were lost, they were cut.

And so, what’s interesting is as they open back up, I think the economy was kind of expecting those roles to just immediately backfill. But what we’ve found is that instead for a variety of reasons, those folks have started to find other lines of work, contracting work, and solo work, and whatnot. And I know I’ve talked to some operators that are experiencing some similar things. When it comes to, just like little odds and end jobs, even if you’re not building a new facility, you’ve probably experienced this kind of thing. So, we’ll get to that more here in just a second.

16:48

So, it is important to note that, you know, as a result of this, though, you’re going to have to re-evaluate the way that you think about your business. If you want to have continued success in the face of a supply crunch, what got you here is not going to get you there. And so, the same playbook is not the same one that you’re gonna run in the next coming months to frankly, potential years. So, over the recent years, many operators have kind of focused on this idea of keeping very simple key metrics, such as occupancy, as their driver, as to whether or not their business is having success.

And unfortunately, that is not the case anymore. It’s just not that simple. And so what we need to do is we need to think about things like focusing on the same store growth. And so this is, you can look a few different ways. You can look at this at a revenue per square foot. You can look at this as revenue per tenant. You can look at this as revenue per unit. But the point is, you need to get down to that more granular level, to be able to understand whether your operations and your business is actually growing or not. And this is especially true as you get fuller and fuller on occupancy. This becomes more and more important.

It’s worth flagging, this is still important when your occupancy percentages are lower. It’s just significantly more important than, I would argue, maybe the most important way to look at your business, during times like this. And so, one of the most common examples of this is unit pricing increases. So, whether you’re using revenue management or manually updating your unit prices, this is definitely the most common way that we see people focus on this. But the reality is, there’s a variety of other ways, whether it comes from a product, or a service, or whatnot, that the operators can implement to be able to increase that kind of revenue per tenant. While still providing valuable services to them.

So, this is another rabbit hole that we’re not going to be going down today, but it is something that you guys should be focused on, and then over time, over the next couple of webinars, we’re going to be diving a little bit deeper on exactly this topic.

18:43

Okay, so next up, I want to talk about some of the labor shortages we’ve been seeing. So, this is actually affecting a variety of industries. So this affects us directly and it affects us in a secondary way but the self-storage industry is definitely not immune to that.

So at the worst point, in 2020, the US had lost over 22 million jobs, right? That’s a massive hit. And restaurants, and retail, and some of those other spaces, particularly in-person spaces, were hit the hardest. But the storage industry was kind of fortunate in the way that we were classified as an essential service in almost all 50 states.

And so this helped many storage employers retain their staff throughout the health crisis. But it is still noteworthy and especially impacts those that are looking for new employees today because you’re very likely competing with some of the other folks in similar spaces.

So I want to take a look at some of these aggregate labor trends. So as you can see here, we have a pretty big gap to make up for, whenever you look at the job losses of last February, and that $22 million dropped, compared to where we’re at today. And according to the Bureau of Labor Statistics, we have seen a little over 550,000 people that have been added to payrolls in the past May. Which would normally be really great growth, obviously. But whenever you’re recovering from a 22 million drop, it’s not so much. But what’s interesting is that when economists, who were kind of surveyed to model out this kind of thing, and to try to anticipate what it should look like, their estimates came in at 670,000. So again, we had 560, they said it was 670. So that’s 120,000 miss or 110,000 miss. And that’s a pretty sizable miss against expectations. Well, we don’t think this is doom and gloom or anything, but I do think this is just worth tracking over time, and just being aware of how this is going to end up impacting us in our industry.

20:37

And so now I want to transition into our last topic for today, which is this concept of portfolio growth through M&A. So this is something we’ve really seen takeoff in the self-storage industry, in particular, over the last 1.5 years, but definitely over the last six months, in particular, and it makes a whole lot of sense in the context of all the market forces that we’ve already been discussing. So, just to kind of illustrate on how big of a trend that is, you don’t have to look very far, you know, Public Storage, the world’s largest owner and operator of self-storage facilities, in the first quarter alone, they’ve invested $2.3 billion to purchase 87 stores to add to their portfolio.

It’s also, just as a side note, a brief aside. Whenever they were asked during their earnings call, kind of where they’re financially focused in 2021, same-store revenue, and NOI growth for same-store were top of mind. And so, if you remember, on the supply crunch just a moment ago, we talked about how, you know, those topics are, those are the concepts we should be focused on, whenever it is during this next phase of growth. They’re also focused on the same thing, so if they’re focused on it, we definitely should be too. They’re the biggest and the best for a reason.

21:48

But going back to M&A for just a second, you know, the purchasing behavior here, the reason that they’re spending as much money as they are, is noteworthy for quite a few different reasons. And I want to walk through those.

22:00

So, first is, as we discussed in today’s webinar a little earlier, construction costs are more expensive than ever. But larger operations, and especially REITs and publicly traded companies, have to constantly be finding ways to continue growing. And they need to find ways to expand their footprint. And so from this perspective, especially when construction is hard, and it’s difficult, and it just, frankly, takes a lot of time, and it’s as expensive as ever, M&A is the obvious answer to their talent.

There’s also some more nuance here, but I think it’s important. So, the resilience demonstrated by the self-storage industry over the last 15 years is incredibly noteworthy and it’s caught a lot of eyes of various, different, you know, asset class investors.

So, if you think back to 2008, if you think back to the 2015 supply crunch, if you think back to the COVID-19 health crisis, we are in a very, very fortunate and great space, right? We had a lot of success as an industry, while a lot of other, you know, adjacent ones were having difficulties. And so, this is especially true, most recently, in the COVID health crisis, for our friends in the commercial real estate space. They took a really big hit and, frankly, it hasn’t really recovered, and especially, as a lot of companies are going remote and for a variety of other reasons. And, so, we suspect that the folks that have been investing in that side of the house for a while are starting to look over into the self-storage industry, and they’re starting to consider massive investments as well over here, and we started to see that with some other companies.

But, lastly, is, you know, even if you’re not a large enterprise account, which most of us aren’t, for smaller operators, this still presents quite a few opportunities that we can take advantage of. So, for one, if you’ve been in the self-storage industry for a while, and especially if you’ve rode out the 2015 supply crunch, you very likely have a very healthy amount of institutional knowledge that will put you at a competitive advantage against these new entrants. And that you know how to respond to these different courses, and come out the other side looking well. And these webinars, in particular, are going to be focused and oriented around helping you gain that competitive edge. So, even if you weren’t around, or you just don’t feel like you maybe handled it as well, we’re going to be hosting, again, some conversations with operators that will give you some practical tips on how to do so.

But second is, you might be considering selling your facility. We’ve seen again, M&A requires two to tango. You know, you’ve got a buyer, but you’ve also got the seller. And we’ve seen a lot of people that are willing to sell. So, if you have any interest in that, you know, this is a really great time to consider doing that before cap rates are really, really solid and a lot, or a large portion of the country here. And so by focusing on things like your facility’s NOI, and your same store growth, you’re positioning yourself to get a really, really good price when you do exit, if you choose to do so. So, you know, things like revenue per square foot, or revenue per tenant, are the right things to be focused on during these coming years, if that’s what your ultimate strategy is.

24:47

And so, in review, we have four main forces that we’re tracking, and, again, these are going to be the foundational pieces of many conversations we’re going to be having over the coming months. So, just as a quick review, we talked about tenant shift to digital and how, you know, tenants are preferring, or even expecting this form of digital engagement. Whether it’s account management or communication or commerce. It’s important that you meet them where they want to be shopping.

But we also talk about the supply crunch where demand is exceeding supply, and we’re not able to keep up, at least for the remainder of the year, if not more, we suspect. And so, we’re going to be discussing how operators can measure the effectiveness of their business at that revenue per tenant level and how you can set yourself up for long-term success.

We also talked about labor shortages and how in an indirect and a direct way, whether it’s the commodity supply chain or whether it’s the storage industry labor in particular, we are on the road to recovery. But it’s just been a slower pace than originally anticipated, and so we’ll talk about how we can respond to that over the next couple of months.

Then, lastly, as growth through M&A, so, you know, a lot of large operators, especially the REITs, they’ve been growing almost exclusively through this, because construction costs remain high, projects have slowed down, labor is tough to acquire. And so, especially during the supply crunch, we are expecting this trend to very much continue. And so whether you’re looking to compete with folks entering the industry, or if you’re considering selling, this is just something you need to stay top of mind, to be able to stay relevant.

26:13

And so, we are a little bit low on time here, so we’re not going to have time for Q&A today. Again, today’s presentation is more around setting the framework and the groundwork for what we’re going to be discussing over the coming months. And so we appreciate you guys joining us for today. But what I do want to say is, again, this is part of a much bigger conversation, this is an ongoing conversation where we want to continue having with you all. So, I wanted to spend a little bit of time just talking about what’s up next.

26:40

So, obviously, we had our webinar today, but in four weeks and the first Friday of September, we’re going to be doing a deep dive on the supply crunch. In our opinion, out of those four, that is the most actionable item that operators can be focused on. Is to be able to just understand what these trends are. How can you measure the success of your business, and how do you position yourself and long-term success? So, we’re going to be diving even deeper into that, talking about some people, processes and technology that you can implement to be able to be successful.

But, we also have another webinar four weeks after that, where we will continue our conversation on the supply crunch. But instead of hearing from Storable, you’re going to be hearing from operators. So we’re going to be gathering some really savvy operators who had a lot of success in the 2015 supply crunch. So that they can start sharing what some of their lessons were, and how they’ve been successful, and how they’ve either organized their people or how they’ve constructed their technology stack to be able to address those things. So, be on the lookout for more information for both of those.

27:41

But I also wanted to share one last one. So this is part of a broader webinar series we’re doing. And we have another exciting webinar that’s coming up, and not too long. And so, remember how we’re talking about revenue per tenant, and revenue per square foot being kind of the north star that we recommend you use to navigate that supply crunch. Well, one of the most effective and just easy-to-implement, easy-to-use self-service, tenant portals, on your website, is one of the most effective ways for you to do exactly that, to accomplish exactly that. And so my colleague, Niko Stoenescu, two weeks from today on Friday, August 20th, is going to be meeting at the exact same time from 12:00 to 12:30 PM Eastern time. To discuss how you can use your website tenant portal to create both a positive customer experience, to simplify your daily operations, and most importantly to positively impact your ROI your NOI. So, we’re going to send a follow-up email to everyone that attended today. A little bit later this afternoon and we’ll include a link to register for this webinar, if that’s of interest to you.

28:42

But that does conclude today’s content. So I just wanted to say thank you. We really appreciate you guys showing up today and the engagement. I apologize, we didn’t have time to get to questions, but, again, I will be following up with each of you individually that submitted questions as we go. And I would just encourage you, please come join us again next month, where we just dive a little bit deeper, and we start getting into the nitty-gritty of now that you understand what you should be thinking about. Now, we’ll start talking about what you should be doing in response to that.

So, if you do have any questions that come up after today’s webinar feel free to send it over to [email protected] and I will get back to you as soon as possible, but otherwise, we will see you next time on our webinar, on Friday, September 3rd. I hope everybody has a great day, and thank you for joining us!