Infused with an $11 million funding round last February, NYC-based self-storage startup Stuf has tripled the size of its real estate footprint over the last year.
In a conversation with the SpareFoot Storage Beat, co-founder and CEO Katharine Lau said the company hopes to double the number of locations it has over the next year, mostly within its established markets.
“We are very much heads down working to expand the national portfolio,” Lau said, “By the end of next year we are looking to have 40 some locations.”
Unlike the traditional self-storage model, Stuf doesn’t own any facilities. Instead, it leases underutilized commercial real estate and converts it into remotely-managed self-storage space in dense urban markets across the country. Stuf is currently located in seven metro areas: New York, Boston, Washington D.C., San Francisco, Atlanta, Seattle, and Los Angeles.
A graduate of NYU, Lau started her career in real estate in 2011 as an analyst at Prudential Real Estate. Later she worked as a development manager for luxury gym chain Equinox, and then most recetly as VP of Real Estate for coworking provider Industrious.
Lau launched Stuf in 2020 after brainstorming business ideas that could leverage some of the roughly 168 million square feet of vacant commercial real estate around the country. Office vacancy has increased since the start of the pandemic, rising from around 12% to more than 16% at the beginning of this year.
“During the pandemic I tried making sourdough bread, and I wasn’t good at that. So I started to think of businesses ideas,” Lau said. “I was thinking how we could monetize this underutilized real estate, and I almost started a ghost kitchen company. Instead, one of the investors I was working with said look at self-storage.”
After that, it was off to the races.
“The way we got our first deal, one of our investors had a connection with a property owner in San Francisco. We started with 25 units and within two to three months it was full. That’s when we knew we had a business on our hands. Now we have 20-plus locations.”
Leading the funding round in February were Altos and Allegion Ventures. Existing investors, including Harlem Capital Partners and Good Friends (backed by the founders of Warby Parker and Allbirds) also participated in the recent raise.
Our conversation with Katharine Lau continues below:
So what exactly is the arrangement you have with commercial landlords?
We sign a lease and do a revenue sharing with our landlord partners. Some have two to three locations with us. We are incentivized for ourselves and our partners to maximize revenue.
How do tenants find your storage facilities?
We are hyperlocal in the neighborhoods where tenants live or work. They want storage near them, and we have the benefit of showing up on geo-targeted digital search, whether through Google or online business directories. We also prioritize signage on the building and develop partnerships with moving companies, local gyms and organizations within a one to three mile radius.
How are you using technology? Are your locations remotely managed?
We remotely manage all of our locations. We have field technicians part-time doing maintenance and cleaning. The customer experience from search to booking, to document verification is all done through a mobile device. The customer doesn’t need to sit inside an office manger’s space filling out forms to lease a unit, they can do it on their own terms.
We have built our own management software to manage our locations that integrates with different building control systems. These are quite different than what you would find in a traditional storage facility. We’ve also started testing using AI to empower our security screening and to detect suspicious activity.
Launching in 2020, that was a great time to get into the self-storage industry. Since last year, self-storage rates and demand have slid nationally. Are you seeing any pullback in your markets?
We haven’t seen a pull back in demand, but we’ve experienced softening on the pricing side. We are not pricing as aggressively as we did a year or two ago. We are still focused on expansion, and we like the seven markets we are in. They are dense and urban markets that are tougher to get into, so we still have a really positive outlook given the niche we are in and the proximity we have to the customer.
Is there an advantage to not owning your own real estate?
Yes, definitely. We can spin up business so much faster now owning. We don’t have to spend two to three years on entitlements when we can use existing space. Then there is the sustainability aspect of avoiding carbon emissions that comes with new development. Some development land could be used for affordable housing and improving economies. There is so much space all around us, and we want to make it useable and convenient for customers while helping property owners.
Why can’t landlords just convert and manage their own storage properties, why do they need Stuf?
Most CRE owners don’t want to manage their own facilities. They have their core expertise, so things like the branding, the insurance that is tied to self storage they don’t want to handle themselves. In fact, we have four or five projects where landlords have done it themselves and then reached out to us because they weren’t full and it was more work than they liked. They hand over the keys and we do cosmetic work, install tech to run the space and taken that responsibility off their hands.