The Profitability of Smart Units in Self Storage Today!

How Operators Are Adapting Amid Market Shifts to Boost NOI with Innovative Technology.

The self-storage sector experienced its peak performance in 2020 and 2021. However, amidst rising interest rates, increased supply, and reduced demand, owners are now exploring new strategies to enhance Net Operating Income (NOI) and profitability in today’s market.

Offering new sources of ancillary revenue, such as Smart Units, is a strategy many owners and operators are adopting to differentiate from local competition, increase revenue, and enhance visibility across the facility. Today’s self-storage Smart Unit solutions vary from offering tenants interior monitoring, door sensing, and automated locks, through familiar mobile phone interfaces like texting or mobile apps.

Smart Unit monitoring is also growing in importance to tenants and is a feature they value investing in. Unit monitoring was ranked one of the two fastest-growing features tenants are willing to pay more for according to the 2023 SSA Demand Study. Today’s modern tenants value the peace of mind and convenience that Smart Units provide and are willing to invest in them.

StorageDefender Inc. is a Texas-based company and the pioneer national service provider of Smart Units. For the past five years, StorageDefender has partnered with facilities nationwide to provide tenants with a 24/7 connection to their storage unit with an easy-to-use, text-based interface. Customers do not have to deal with the complexity of downloading an app, provisioning devices to a phone, or ensuring Wi-Fi and Bluetooth are turned on. While these are an option, they often lead to issues in use for tenants and added customer support for facility personnel. With StorageDefender, tenants simply receive real-time text alerts whenever activity is detected inside their Smart Unit, ensuring peace of mind and confidence in the safety of their belongings.

Owners and operators such as Darren Kelley, the President of Right Move Storage, and Max May, the Chief Operating Officer of Easy Stop Storage, have adopted StorageDefender Smart Units and seen significant success and tenant satisfaction. Let’s dive into the various benefits of Smart Units across both of their portfolios.

Differentiation to Attract New Tenants

Darren Kelly highlighted how the industry has transitioned from a period of high demand and limited supply to one characterized by increased competition and operational complexities. Traditional methods of maximizing NOI through rate management are no longer sufficient. Instead, differentiation has become critical in retaining a competitive advantage.

“Differentiation has been my goal from day one. To separate myself so that I stood out from competition,” said Darren Kelley, “And I have been really focusing on ancillary revenue growth to combat the fixed expenses that continue to go up. StorageDefender Smart Units has been a savior to us in countering the rising expenses, non-controllables, taxes, and insurance that we’ve had.” Similar to Right Move Storage, Easy Stop Storage was facing softening revenue and margins in an environment of increased competitive pressure, falling rates, and increasing supply. Looking for ways to differentiate locally, Max May decided to pilot StorageDefender Smart Units in 2022.

“One of the hard things about storage is finding additional revenue streams, what is going to set you apart from your competition down the street?” explained May. Having seen measurable success and high tenant satisfaction during the initial pilot, May has since rolled out Smart Units across all 25 of Easy Stop Storage’s properties. After a year and a half of original implementation, Easy Stop Storage is witnessing a 97% adoption rate of Smart Units across the portfolio. Their properties successfully differentiate themselves from local competition by positioning themselves as Smart Facilities with the help of Smart Unit promotions across their website and in-store marketing assets across the property.

Increasing Ancillary Revenue with Smart Units

In the competitive landscape of the self-storage industry, maintaining profitability amidst market fluctuations and declining rates among Real Estate Investment Trusts (REITs) poses a significant challenge. Operators like Darren Kelley and Max May have successfully navigated these challenges by leveraging Smart Units to not only differentiate from competitors but also to increase ancillary revenue.

Darren Kelley underscores the critical role of ancillary revenue in offsetting declining market conditions: “It just becomes a race to the bottom. You see it with some REIT’s dive bombing due to their financial situation. Ancillary services like Smart Units have been pivotal for us in maintaining stable profits.” This strategic approach ensures that fluctuations in rental rates or economic downturns do not erode profitability, as revenue from Smart Units contributes directly to NOI.

Kelley further illustrates the financial impact of Smart Units and the 96% adoption rate of Smart Units across his portfolio: “We have a property that is 70% penetrated with Smart Units, generating over $6,000 in revenue monthly from 560 units rented at an additional $12 each.” This implementation has resulted in an annual increase of more than $72,000 at that location alone, with Kelley noting a swift 12-month payback period per Smart Unit device. These successes have significantly boosted profits across all Right Move Storage locations.

Enhanced Tenant Experience

Beyond the financial benefits, Smart Units significantly enhance the tenant experience by connecting tenants to their valuables 24/7. StorageDefender offers playbooks that attain a national average of 6 out of every 10 tenants opting for a premium Smart Unit over a standard unit. Partners like Right Move Storage and Easy Stop Storage have seen even greater success, with average conversion rates of 96% and 97%, respectively. Kelley emphasizes the tenant’s appeal: “The customer is immediately connected to their unit and can control the defense of their goods. That’s something they’ve never had before until this Smart Unit device.”

Kelley further elaborates on the value Smart Units bring to tenants: “Overall, I think it’s bringing peace of mind to our customers and they have control over the protection of their goods. That does help in terms of the winning units and getting people to feel good about storing their valuables at the property.”

After surveying over 2,000 random tenants of Right Move Storage, responses showed that over 70% of tenants were advocates of the Smart Unit service and would recommend it to a friend. A tenant named Michelle P. recently reviewed the service after renting from a location in Spring, Texas: “It is a great feature. If someone ever tried to break into my unit, I would be notified immediately and it also notifies the office. I definitely recommend it.”

The utilization of smart technology at Easy Stop Storage has also led to strengthened customer loyalty and improved tenant satisfaction, with tenants expressing appreciation for the enhanced customer experience. May emphasized, “Tenants love it for the sense of peace of mind. It creates that umbilical cord for the tenant to their units, so they always know what’s going on.”

Across StorageDefender’s base of facility partners, 78% of tenants who rented Smart Units said they would look for StorageDefender Smart Units at their next facility. This number is expected to increase as Smart Unit monitoring becomes an anticipated feature in the industry, especially among younger generations.

Looking Ahead

As owners and operators navigate fluctuating demand, increased supply, and evolving consumer preferences, Smart Units have emerged as a key solution for enhancing profitability. By leveraging Smart Units, operators can not only differentiate their facilities but also generate substantial ancillary revenue streams that bolster NOI.

The success stories of industry leaders like Darren Kelley of Right Move Storage and Max May of Easy Stop Storage underscore the transformative impact of this technology. These operators have not only increased revenue but also elevated tenant satisfaction by providing enhanced protection and peace of mind.

Looking ahead, the widespread adoption of Smart Units is poised to redefine industry standards, with tenants increasingly prioritizing facilities equipped with advanced monitoring and a personalized experience. By investing in Smart Units, operators not only future-proof their facilities but also enrich the tenant experience, ensuring long-term success in an ever-evolving market.

To learn more about the benefits of incorporating Smart Units into your self-storage operations, visit www.storage-defender.com or email marketing@storage-defender.com.

Brook Bland is the Marketing Manager at StorageDefender Inc., the pioneer leader in smart tenant unit monitoring services for the self-storage industry. StorageDefender enhances tenant peace of mind while providing storage facilities with a new, independent, recurring revenue stream per unit. Brook obtained a Bachelor’s degree in Marketing from the University of North Texas and is passionate about all things marketing and self-storage. For more information, call (877) 533-3363 or email brook@storage-defender.com.