Putting On The Ritz
Coming to a corner near you, a self-storage center that won't look like a self-storage center.
Paul Temple, a goateed former hotel manager, waits for guests behind a massive wrap-around desk, a bank of security screens behind him, a flat-screen computer monitor in front. Schooled in the culture and vocabulary of hotels, Temple exudes high touch. He calls the covered loading area the porte cochere. To his customers -- retirees leaving bigger homes up North, transplants settling in to new jobs, divorced couples splitting up households and adult children grieving for lost parents -- he offers comfort and soothing reassurance that their possessions will be safe.
"It's a big relief for people," says Temple, 36. "I see it on their faces."
This is self-storage?
Behind the wine lockers, shiny floors and Temple are brothers Rich and Gary Cardamone, developers chasing a trend in which Florida's highly competitive, billion-dollar self-storage market is going upscale -- rapidly. Developers are rushing to place storage centers in prime, high-visibility locations near the local Publix or Walgreens in hopes of attracting drive-by customers, particularly women.
"The industry used to be chain-link fence, off by the water treatment plant," says Rich Cardamone, COO of the brothers' Sanford-based company, USA Stor-A-Way.
No longer. The USA Stor-A-Way in Naples, for example, sits strategically at the intersection of Davis Boulevard and Airport Road, where more than 80,000 cars pass daily. Equally handsome, the Lock-Up Self Storage center on Pine Ridge Road sees more than 40,000 cars pass by each day.
Harvey Lenkin, president and COO of industry leader Public Storage Inc., a real estate investment trust that operates 139 centers in Florida out of about 1,500 nationwide, says his company now focuses on streets with heavy traffic surrounded by dense populations with high incomes.
For developers like the Cardamones and Lenkin, going upscale and visible has implications. The sites, says Lenkin, are "much more expensive than industrial land." To make them work financially, "You need to go up."
Up they've gone. The 10-story Miami Storage Mart, located downtown on S.W. Second Avenue, earned bragging rights in Inside Self-Storage magazine as the tallest in the country when it opened in 2002. More common among the new upscale centers are three- and four-story buildings.
If finances dictate going up, politics requires that storage centers be attractive. Local governments, egged on by neighborhood opposition, won't let self-storage centers into fashionable areas if they don't look the part. Brian Pelski, real estate director for Liberty Investment Properties, the exclusive development partner in Florida for Shurgard, says only one out of 10 prime locations has the proper zoning for storage.
Developers' response: Storage centers have a much lower traffic impact on an intersection than retail or other uses. And homeowner groups become believers once they see what the upscale centers will look like, Pelski says.
The gussied-up centers aren't just about pleasing neighbors, however. Developers like the Cardamones bet they can attract a new class of patrons from among all those passing drivers -- women who yearn for the uncluttered life, a place for the Christmas decorations and grandma's heirloom Noritake china. "Very often, women make the decisions," says Ed Robb, an economist hired by the national Self Storage Association to study demand.
The Cardamones think they know what will bring in women customers: A center that's clean, well-lit and safe, with 24-hour keypad access. The climate-controlled Naples center has motion-detection lighting and 30 security cameras. Tenants must key their security code into the high-speed freight elevator, which gives them access only to the floor their unit is on.
New centers such as those operated by the Cardamones and industry giants Public Storage and Shurgard also sell a host of related goods and services -- from packing materials to FedEx shipping and truck rentals. The Cardamones are toying with the idea of adding a small consignment shop so tenants won't have to hassle with a garage sale if they tire of some possessions.
"We're not just selling space here," says Gary Cardamone. "We're selling customer service."
While the Cardamones didn't invent upscale self-storage, they've embraced the trend enthusiastically. Gary, 38, a former medical products salesman, became interested in the industry when a center where he stored his wares was full and couldn't rent him more space. "I think I found our business," Gary told Rich, and the brothers sketched out a business plan. Their goal: 10 locations in seven years. Their exit strategy: Sell to a large real estate investment trust or go public.
Rich, now 41, kicked in the initial $15,000 investment and left his job as vice president of sales at Rexall Sundown, the publicly traded vitamin and supplement company, in 2002 to pursue the self-storage venture full time.
Sons of a shoemaker in Pittsburgh, the Cardamones believed their flair for sales would serve them well. They'd seen many centers, even some fully occupied, that hadn't "marketed their way out of a paper bag," Gary says.
The Cardamones have centers in Naples and Sanford, with two more opening in Osprey and Orlando. By the end of 2005, they expect to own nearly half a million square feet of storage-space real estate valued at $41 million. "My brother says 'God keeps making people, and they keep moving to Florida,' " says Rich.
Maybe so. But industry watcher Charles Ray Wilson, founder of Self Storage Data Services in Pasadena, Calif., cautions startup operators. "They think it's a slam-dunk moneymaker, and it isn't. It's getting tougher."
Overall rents have declined in the last year. Mobile self-storage pods have made some dent in the market. Some operators, like Robert Francis of The Heron Group in Kissimmee, worry that Florida has a glut of supply in some markets. Francis also sees rising steel prices as a looming calamity for the industry.
Still, the Cardamones and others have reason to feel encouraged by the level of demand -- nudged by the fallout from the hurricanes this summer.
Typically, self-storage centers nationwide average about 85% occupancy. But the Tampa-St. Petersburg metro area saw occupancy rates for air-conditioned storage climb to 93% in the second quarter, according to Self Storage Data Services. Occupancy rates for Orlando and Miami came in at 92% and 88% respectively.
Whether the Cardamones succeed will depend on their ability to attract more customers like Mickey Rudolph, a tenant at the Naples USA Stor-A-Way. Rudolph, the owner of a vintage wine and spirits business, has downsized from four homes to one in recent years. Rudolph says he was attracted to the USA Stor-A-Way in Naples because it wasn't a "roach city" location where a burglar could bust into a garage unit with a bolt cutter. The Stor-A-Way is "not just clean, it's super clean," says Rudolph. "These floors are buffed."