The following Q&A was completed as part of our conversational Commercial Real Estate FAQ Interview Series, we hope you find it helpful.
Self storage assets don’t get the credit they deserve in terms of operational need. One can choose what they want their self storage property to be, and if they’re looking to craft a brand and develop a customer experience, they’re looking at operational efforts more in line with a hotel without the move in/move out daily churn. Operationally, what one puts into their self storage asset will directly reflect the revenue they may generate.
Richard Wilson: How much of self storage is really an operational game versus a real estate acquisition process? For example, hospitality and senior living – heavily operational. A parking garage a big warehouse that you don’t have to visit more than once a year is heavily non-operational. Where do you think self storage lands on that?
John Manes: It’s funny you say that because you know this – I’m the operator on our team, right?
John: And I’ve always said, in this industry, that operations doesn’t get enough credit because everybody is financially focused from an asset standpoint, but not from the operations. But the reality is is that operations is what drives that revenue which then gives the value to the asset. So, in this industry, I would say that it’s not as heavily move in move out as a hotel would be, because you get daily rentals which is a lot of churn, but it’s as operationally heavy as a hotel would be other than the move in move out on a daily basis. You still have to clean property, you still have to maintain your curb appeal, you still have to have a good brand. Like in the hotel industry, you can stay at a Motel 6 or you can stay at a Hilton, and you’ve got two different qualities, right? Well what brand are you trying to create from your curb appeal and all that kind of stuff, which requires capital, and money, and things like that. You can run a mom and pop type of self storage property operationally, and not pick up your trash, and not fix your gate when it’s broken, and all the stuff that your motels do, or you can run it like a Hilton, or you can run it somewhere in between. We try to be the Hilton, and we go in and we take the motel and we fix it up to be the Hilton. So, operationally, I think it’s probably in line with the hotel, it just doesn’t get enough credit that it’s in line with the hotel.
Richard: Right, right, makes sense.