
Self-storage: The men who got rich selling empty space - timw6n
http://www.bbc.co.uk/news/business-26921870
======
pdeuchler
This article misses the entire point of the self storage game, in that it's
all about real estate. I'm not sure of the structure they have over in the UK
but I'm quite sure it's the same type of thing, considering that land over
there is much more valuable.

Here in the US you'll find a vast majority of the land used for self-storage
is owned by either investment firms specializing in commercial/self-storage
real estate, MLP's (Master Limited Partnerships), or REIT's (Real Estate
Investment Trusts). There are a lot of nuances to it, but essentially these
are tax vehicles that buy up a bunch of not particularly sexy land, but in an
industrious location that has long term potential. The issue then becomes what
to do with the land while you sit on it, and the answer to that is self-
storage. Self-storage warehouses are incredibly cheap to build and operate,
often times the largest cost is insurance (although that's not saying much
nowadays). Many MLP's/REIT's either own their own self-storage company, own a
controlling share in one, or at least own a good percentage of one, or the
self-storage company in and of itself is an investment firm wrapped in a thin
veneer of self-storage. Thus, on top of the rent you can get a nice cut of the
storage profits. It's a fantastic racket if you can get momentum, after a
certain point the money essentially prints itself and you still have control
of a massive chunk of land to boot. The self-storage business is also very
predictable, and highly tuned, so the investment returns on both the land and
the storage business are very conducive to long term wealth building.

~~~
larrys
I'd be curious where you are getting that narrative from. It differs from what
I am familiar with for sure in terms of knowledge of this industry. Not that
that's not the play of some REIT's (or what they say they are doing but not
really doing) of course but I wonder how many of the locations fall into that
category vs. just "after a certain point the money essentially prints itself".
Which sounds pretty good. [1]

(What you are saying is typically done though with parking lots in cities for
sure for various reasons.)

"and you still have control of a massive chunk of land to boot"

Unless you have land in a particularly valuable location the fact that there
is a building on it is going to contradict having someone purchase it for
development purposes. It's being used. In other words "nothing to see here
move along". And if it was in a super valuable upcoming area that would
already be priced into the land cost and might be prohibitive.

I'd also would like to know what the time frame is for something like this to
actually happen and _how many times it has actually been done_. That is, out
of the entire self storage industry, how many locations (multi level for
example - those larger buildings) have been raised for a higher use (with
every tenant thrown out)? And something else built on the land which generates
more revenue. Where a comparable piece of empty land was not available?

Of course it might be something that the REIT says marketing wise in order to
enhance the appearance of the value of their properties. But to me it seems
that the reality of whether that would actually happen (and how often) might
be entirely different.

That said any links to this would be nice if you can pass along.

[1] For self storage that I am also familiar with they predictably raise the
price every year. And it's not easy to move things out (you need a truck or
you need to dispose of something.)

~~~
itbeho
I've seen one self storage facility in my town removed in favor of a
commercial medical plaza recently.

Self storage buildings around here are just cheaply built steel buildings.
They are easy to dismantle.

~~~
larrys
There are those for sure. Separately I know of a 155 unit residential condo
complex in Florida that is being torn down to build a high rise (resulting in
4x value to unit owners the market is so hot right now).

But then there are these examples which seem highly unlikely as the investment
play involved. Browse the links on this (a typical larger storage company
site) and you will see nobody is putting up a building multi story (with
elevators) and hundreds of tenants with the intent of holding it to tear down.
Not that like anything it couldn't be torn down if the right opportunity came
along.

[http://www.publicstorage.com/](http://www.publicstorage.com/)

[http://ir.extraspace.com/phoenix.zhtml?c=180054&p=irol-
irhom...](http://ir.extraspace.com/phoenix.zhtml?c=180054&p=irol-irhome)

But hard to believe that is actually the business model they are relying on
although it could of course be a future upside.

------
AlexMuir
"Danny Dorling, professor of geography at Oxford University, says we have six
times more "stuff" than the generation before us."

I run a storage business and I can say that this is no longer the case with
the younger generation. We used to store boxes of CDs, Videos, 14" Colour TVs,
Desktop Computers, Hifis. Now all this is in a laptop and mobile phone, which
people just take with them. We now insist on up-front payment as the items
people store are worthless to sell.

90% of what we store is now boxes/suitcases of clothes and books.

~~~
josefresco
"We now insist on up-front payment as the items people store are worthless to
sell."

Was this ever different? Boxes of CD's, videos and tube TV's don't sound that
valuable. But reading into your comment, it seems it wasn't always like
this...

~~~
bkmartin
It might now seem that way, but when you can put those things into a second
hand shop for $1-$5 a piece someone's DVD, or CD collection can become quite
valuable when its abandoned. Some people did/do store hundreds of cd's, dvds,
and the like. A unit could have a thousand dollars(in real secondhand market
value) of merch very easily.

~~~
josefresco
Do CD's/DVD's not have this value anymore? I could CD's being phased out, but
DVD's are still entrenched. Maybe with online streaming (Netflix) DVD's too
are going away? I would think this would be a lagging indicator though as I
can see many storing their DVD's now that streaming is an option.

~~~
yardie
CD's don't and never really did. If you bring in an early CD (like from the
80s) you can get a nominal amount because CDs were rare then. If you bring in
a CD from the last 10-15 years they are nearly worthless. Most shops ended up
shredding the extra.

DVDs have a bit of crazy market. Some distributors (Disney and Criterion
especially) do a short limited run. The 2nd hand stores rely on these gems in
a big box of junk to make profit.

------
ColinWright
From the article:

    
    
        But there is one clear lesson from the storage story.
    
        If you want to be a millionaire, you'd be well advised
        to look beyond what's sexy.
    

Quoting from Paul Graham:

    
    
        There are great startup ideas lying around unexploited
        right under our noses. One reason we don't see them is
        a phenomenon I call "schlep blindness." "Schlep" was
        originally a Yiddish word but has passed into general
        use in the US. It means a tedious, unpleasant task.
    

\-- [http://paulgraham.com/schlep.html](http://paulgraham.com/schlep.html)

~~~
rayiner
It's also a great example of the general principle that it's good business to
try and figure out how to disproportionately leverage public resources.

Say police protection and property enforcement was privatized. Under such
circumstances, the cost of security for a storage facility would be
substantial. But in a society where the public pays for security, it's "free"
to create a business that presents an outsized target for thieves.

~~~
PeterWhittaker
Hardly. Physical security at self-storage facilities is comparable to that at
non-classified government installations - at least the ones I've seen in
Canada: Perimeter fencing with logged access control, CCTVs and live
monitoring, individual locks on storage areas, etc.

Add the cost of insurance, bonding, etc., and there is absolutely no "free"
involved.

~~~
rayiner
That's the security expenditure assuming the backdrop of government
enforcement of property rights. Imagine running a storage facility in a place
like Somalia. You'd need way more than a perimeter fence and monitoring!

When my family lived in Bangladesh, we once had a band of thieves (in a
van/bus with guns) try to break down our gate. One of those would roll through
the security at your typical storage facility.

~~~
PeterWhittaker
Not to be belabour the point, but in a place like Somalia, gun toting labour
is cheap. You'd need two or three "shift supervisors" (overseers who keep the
labour in line, really), and you'd pay them more, but overall, the teens with
AKs and the tough-as-nails-and-mean-as-hell overseers would likely end up
costing less than one pays in taxes.

Now add the cut to the local warlord, who "respects" your area so long as you
"respect" his due.

Oh, wait, that's starting to look a lot like taxation, police services, rights
enforcement. Just without the actual rule of law, good governance, and an
independent judiciary.

Really, I do not understand this notion that police services, etc., are free.
We pay for them with every dollar we earn and every dollar we spend.

As the man said, I like paying taxes, with them I buy civilization.

------
marincounty
If you have to rent a storage unit get the smallest unit, and get rid of it
quick. I used to work for this thieving industry. The owners know once you
move your stuff in; they have a customer for life. As you get older you will
accumulate some good stuff, but make sure it can all fit in a closet sized
unit. Keep tools of your trade. Keep valuable jewelry, and silver. As for
books, it's my sore spot--I have a small library. If I needed to part with
them, and I just might ave too, I'd keep a valuable first editions, and two
milk crates full of must have refrence books. The indusrtry is a slimy
business. The owners take advantage of hoarders, sedimental types, and the
desperate. They literally have industry seminars where they discuss making
more money on late fees. The also ask for your S.S. number when renting(I
think that is illegial?). Don't take your frustrations out on the country guy
--he's just a low paid worker. If you do plan on skipping out on the highest
per square foot rent in the world--get your stuff out before the lock goes on.
Use their dumpster and throw 90 percent of your garbage out. Yes--most of you
store garbage. Women store to many linens, books, and Chinese made furniture,
and the inherited sewing machine(keep the machine, throw away the cabinet).
Men store too many redundant tools, or huge tools they never use. Keep the
suitcase Tig/stick welder. You don't need three welders. Keep the Snap-on
tools, but sell the huge cabinet. Sell all antiques, and give away the cheap
furniture including the matress. Everyone seems to cling to there matress? My
final thought--sit down and roughly figure out how much your stuff is worth.
Figure out how many months if rent will replace your possessions? For 95
percent of you it's a couple of months rent. Good luck. Oh yea, I would like
to see all rents due on the first of the month. They prorate on the date you
move in. Why--so you will forget to ake you payment, and have to pay a late
charge. Forgo the rental insurance. Sue the mini storage in small claims court
if they slip up in any fashion( I.e. have video cameras, but don't have the
tape of your unit being broken into. As to the mini storage owners--yes--you
are extorting people at a very stressful time in their lives; you are just
like pawn Shop Owners. When you filthy Lookers are counting your ill gotten
gains, keep Sundays open, and drop by a local church--you might hear something
interesting.

------
bluedino
I never understood friends who put things in storage. It was their used
furniture and things they never used. But they'd gladly play $100/month to
store it away for 2-3 years at a time. You're better off just selling it and
buy new (used) things in a year or two.

Not to mention the hassle of moving things to and from the storage unit!

~~~
jdeibele
I've only rented a storage unit a couple of times but for me there were two
factors: one was knowing the history of everything that was in it. And the
other was that I had chosen those items.

I liked knowing that nothing was damaged in ways that weren't easily visible,
like something you bought used might be.

And I don't enjoy shopping so trying to get something just like what I had
is/was difficult. And it's getting harder: manufacturers change models at an
incredible rate. You have to read reviews all over again, etc.

------
hf
Coincidentally, this is something I have researched just last week for my
area. I would love to store boxes upon boxes of things that I will need in
another two years (eg. baby clothes), will sell eventually, or plain don't
want around[0].

Unfortunately, I have come to the conclusion that the concept of self-storage
presented here, quite similar in spirit to my local self-storage providers
(henceforth: SSPs), is not reconcilable with my use-cases and fundamental
needs.

To wit: All SSPs that I found were located on the outskirts of town.
"Industrial estate" would describe it well. This calls for car ownership (or
rental, at least) and huge transfer volumes.

But I want to spirit away a smallish box every month or so. I would like to
carry it (perhaps in a bicycle trailer) around the corner. In short: I want
those SSPs to be as ubiquitous as libraries.

Now, are there cities were a system not unlike to the one outlined above
exists? If so, are hacker/maker spaces similarly well-distributed?

[0] Books, chiefly by virtue of their _tactility_ , belong solidly into the
latter category, as non-intuitive as it may sound: these cellulose blighters
are _everywhere_ and frankly cumbersome to circumnavigate by now.

~~~
JaakkoP
Hope you don't mind me asking if you live in Texas? I'd love to ask feedback
about my storage on demand startup remotegarage.com, as it sounds like it
would serve your needs better than traditional self-storage?

~~~
hf
I don't want to sound overly enthusiastic, but I do think that this fits the
bill 90% of the way. Great presentation[0]; pricing _explicit_ and almost
exactly what I would have imagined; and, of course, sane pick-up and delivery.
I even hunted around for a spelling mistake to have something on the opposite
side of the ledger. No such luck.

Alas, I'm a few thousand miles short of becoming a valued customer.

Now, hopefully, you're wondering about that last 10%: It's point 2 in your
"How it works":

> Pack your things carefully and take pictures of the contents.

I'm sure legal would have a word or two to say about that, but: how much would
it set me back if _you_ did that, together with providing a rough description
of the box' contents? This, then, would appear on my account page's List of
Boxes.

The details are devilish, of course, and supreme caution is indicated: you
don't want a prominent "take-a-peek" option to adversely affect the trust of
your more privacy-conscious clients.

[0] Which, incidentally, doesn't appeal to me, as I am solidly in the tarsnap
aesthetics camp, but we both know what to make of that.

~~~
JaakkoP
Happy to hear you like the 90% so much - thank you for the feedback!

As for the 10%, we have indeed found that quite a few customers end up not
taking pictures, even though it's a requirement to qualify for the protection
plan.

We would be happy to take those pictures, but I wonder if there's a way to do
it so that it doesn't interfere with the customer's privacy. Drivers taking
the pictures upon pickup comes to mind.

------
grecy
I spent 2 years living in rural Central and South America, and of all the
things that shocked me on my return to North America, the sheer amount of
_stuff_ people have was by far the biggest.

People have multiple cars, boats, quads, kayaks, tvs, couches, RVs,
snowboards, skis... the list is endless.

I was dumbfounded that people have so much _stuff_ , they pay money to put
that stuff someplace.

------
kcovia
Whether it's for economic (less spending money), technological (mp3s are a lot
smaller than CDs), or simply cultural reasons, the younger generation seems to
have less stuff.

I see an opportunity in 5-10 years...microapartments in former self-storage
space?

~~~
parenthesis
Some people already run mail-order businesses from self-storage units:

[http://www.bbc.co.uk/news/business-25336446](http://www.bbc.co.uk/news/business-25336446)

~~~
Jtsummers
This seems like a more likely outcome than living spaces. If for no other
reason than a lack of water/electric outlets for home use. Air-conditioned
storage units could make decent (depending on location) store fronts as well,
in a sort of industrial mall sort of way.

------
tpowell
I don't know if they're international or not yet (I doubt it), but an Austin
startup is trying to professionalize this unsexy market:

[http://www.sparefoot.com/](http://www.sparefoot.com/)

~~~
thinkling
The web-enabled home-delivery version of storage:
[http://www.storrage.com/](http://www.storrage.com/)

You don't get your own storage unit; instead, they pick up labeled tubs from
your house, and when you want them again you can request a specific one to be
delivered. They don't take furniture and such.

(Disclaimer: I'm not connected to this company in any way, not even as a
customer.0

------
frogpelt
Self-storage is quite an interesting phenomenon. The total self storage
rentable space in the US is now 2.3 billion square feet.[1] That's enough
space for every American to have over 7 square feet in which to stand. In
fact, that's probably enough to lay down.

To be sure, a lot of other men and women got rich before the storage men, in
order for us to have more stuff than will fit in our houses.

1\.
[http://www.selfstorage.org/ssa/content/navigationmenu/abouts...](http://www.selfstorage.org/ssa/content/navigationmenu/aboutssa/factsheet/)

------
theorique
Tyler Durden says: "The things you own, end up owning you."

------
rajacombinator
What a silly headline. All housing is empty space when sold too.

------
robmaceachern
Any post about storage units should reference this George Carlin routine
[http://youtu.be/4x_QkGPCL18](http://youtu.be/4x_QkGPCL18)

------
ambrop7
I read most of the article but I'm still not sure: What is self-storage? How
is it different from just selling storage space?

------
rabino
The title is lame. He didn't get rich selling empty space. He got rich selling
what's enclosing that empty space.

~~~
frogpelt
I thought so too.

You could call undeveloped, beach-front property empty space too, but it would
be disingenuous.

