By ELIZABETH HAYES
Staff Reporter
While searching for real estate opportunities a few years back, Vicky Schiff went beyond the obvious.
Uninterested in office space, apartment complexes or shopping centers, she eventually hit upon storage an area that’s relatively young, decidedly unglamorous and seemingly dominated by a behemoth, publicly held company.
And bursting with opportunity, she says.
“The public is just starting to realize the advantages of storage,” says Schiff. “It’s somewhat isolated from economic factors. If you’re downsizing, you need storage space, and if you’re growing, you need it.”
Since Schiff founded StorAmerica less than two years ago, its portfolio has grown to about 1.3 million square feet and is on track to grow to 2 million by the end of the year. Meanwhile, the firm is making a push into L.A., with six sites currently under contract to be acquired.
StorAmerica formed the company in an equity partnership with Lexington Commercial Holdings Inc., a Beverly Hills-based real estate investment firm headed by billionaire Louis Gonda. Schiff, who previously handled acquisitions at El Segundo-based Summit Commercial, declined to disclose revenues but says the payroll has grown to 60 employees.
Analysts say the $8 billion self-storage industry has seen significant growth in the past 10 years and more is expected because the market is diversifying.
With $582 million in 1998 revenues, Glendale-based Public Storage Inc. is by far the nation’s largest provider of rental storage space. But there are legions of smaller players that have capitalized on the industry’s low start-up costs and growth fueled by a population with lots of stuff to store.
About 40 percent of the customers are businesses that store records and other material. Other users rent space for everything from furniture to sports cars and Christmas decorations.
Indeed, the industry rule of thumb is that every individual eventually will need three to four square feet of storage space. And prices are relatively affordable. A 100-square-foot space runs anywhere from $65 to $175 a month, depending on the size and desirability of the location.
Aiding newcomers like Schiff is the fact that much of the existing space is becoming obsolete by today’s standards.
Industry officials say occupancy rates at existing self-storage facilities average at least 90 percent, depending on location and other factors. That demand is expected to result in a 6 percent increase in 1999 revenues over 1998, according to Charles Ray Wilson of CRW Associates in Pasadena, which specializes in self-storage appraisals.
But while high-density areas with transient populations are being targeted, Schiff says L.A. is a tough market because sites are scarce, especially as self-storage facilities move from industrial areas to denser commercial areas.
In addition, homeowner groups and tax-hungry cities don’t exactly greet public-storage facilities with open arms.
“We want to be in high-traffic locations, and the city wants Burger King or McDonald’s,” says Ron Soderling, senior partner at Newport Beach-based Resco, an affiliate of mini-warehouser, Shurgard.
Soderling, who believes there is a market for 1 million square feet of new storage space a year in Los Angeles, says Resco/Shurgard also is making a push into the area, with projects planned on the Westside and in the San Fernando Valley.
Tustin-based AAA Quality Self-Storage is yet another contender, with locations in Glendale and Covina and another planned in Long Beach.
“I think there are still a number of areas under-served by self-storage. While it’s difficult and expensive to build out here, that keeps more of the amateur types out of the business,” says AAA owner Henry Pritchett.
While Public Storage has by far the most storage facilities of any company, the real estate investment trust by no means has the market cornered. The top-10 public-storage firms nationwide control less than 20 percent of the business, with the balance mostly consisting of mom-and-pop operations.
Schiff says the key to success is offering specials to target markets, such as military families or law firms, and creating alliances with home-building companies and apartment complexes.
