The following article is solely the opinion of the author. If you are interested in submitting an op/ed article for the Storage Beat, please contact editor@sparefoot.com.

There is no doubt that “on demand” or “full service” storage is making waves within the storage industry, despite the lack of recognition from major self-storage operators. Top investment firms across the United States have invested millions into on demand storage startups because they offer what self-storage facilities cannot – flexibility and convenience.

In the era of our society’s “on demand economy,” consumers’ decision-making is driven by primarily by these two factors. We need look no further than Uber, the largest force behind the upheaval of the taxi industry, for proof of the “on demand” movement. During the last two years alone, Medallion Financial Corp. (lender for taxi medallions), saw its stock price decline from roughly $11 to $2 (NASDAQ:MFIN).

In time, we will see similar trends with the large publicly traded self-storage REITs, as consumers continue to prioritize convenience, flexibility, and price. The full-service model eliminates location and means as factors or obstacles when choosing a facility.

Full service storage companies, including my company OnDemand Storage, eliminate these obstacles, and creates value for the customer by charging only for space used. Because each traditional self-storage facility has a limited number of specific-sized units, customers are often forced into units larger than needed, and overpay as a result. Full-service operators have an infinite supply of “any size” unit.

Couple this kind of flexibility with macro trends in urbanization, and it’s clear that on demand storage is only increasing in popularity. With the lion’s share of capital investment directed at companies headquartered in major cities, small living in apartments and condos will continue, as well the demand for more space. Data shows that both Baby Boomers and millennials are moving back to urban areas, and are willing to trade garages and basements for proximity to jobs and social centers.

A delivery vehicle for OnDemand Storage on the streets of Boston.
A delivery vehicle for OnDemand Storage on the streets of Boston.

Millennials prefer on demand

Millennials accustomed to using on demand services are far more likely to use an on demand model as opposed to the labor intensive self-storage process, especially when full service storage companies offer cheaper prices because of cheaper real estate.

Full service storage opens a new market of customers that previously would not have used storage. We have tapped into a market of consumers who are now interested in storage simply to free up space in their homes by storing seasonal clothing or items such as sporting equipment (without overpaying for an entire unit). We call these customers “City Store-ers” – they place a high value on maximizing their apartment or condo’s square footage, but only if they can do so in a convenient and cost-effective manner that does not interrupt their lifestyle.

Self-storage has made a living off being in high traffic, highly visible locations, but this has forced operators to raise rents to unsustainable levels to generate meaningful NOI. OnDemand Storage is located eight miles outside of Boston, allowing us to charge fair rates for storage plans. Our 10×10 plan costs around $150/month, including free pick up and drop off. I have seen 2nd floor 10×10 units as high as $265 per month in Boston, with averages around $185.

While traditional self-storage is purely a real estate investment focused on optimal occupancy rates and NOI maximization, on demand storage has a customer centric business model, providing more value per dollar.

It’s this focus on doing right by the customer that will help drive on demand storage to become the preferred method of storage within the next five years.

Barrett O'Neill
  • http://www.opentechalliance.com/ Robert A. Chiti

    I wish the article included some real data to support the claims. In my experience, just because VC money is chasing an idea does not mean all the companies in the space will survive nor does it mean the concept has staying power. It seems these companies have used the entire market (annual revenue) to build their investment case, when in my opinion they should be more compared to the mobile (Pods) market. My last comment would be that Barrett might want to review Public Storage’s financials, before predicting a down turn in their stock. Holding drivers hostage with the requirement of a medallion is not a reasonable comparison to a company that owns real estate and has no real debt. I wish Barrett all the best, but would urge him focus on making his business profitable instead of throwing rocks at an industry that has been around over 45 years, weathered a few nasty economic cycles, and has provided millions of consumers a solution to their storage needs. :) Cheers.

    • Barrett O’Neill

      Hi Robert,

      I understand that your business deals with providing back end services for self storage operators and therefore understand your one-sided view on this issue. I do not believe in the near future on-demand storage companies will overtake self storage. But, in time this WILL happen, it is obvious as the largest companies in the world are providing on-demand services (Amazon, Wal Mart, etc.) and millennials undoubtedly prefer this method…67% according this article… Did you know that Millennials are now the largest percentage of the population?

      http://www.businesswire.com/news/home/20160209005608/en/New-Report-Mobile-Consumers-Ready-Access-On-Demand

      Weathering cycles in the past is no indicator of future success especially with the rapid acceptance of technology as a part of our daily lives. It creates an entirely different scenario than self storage has faced during any economic downturn, therefore nullifying arguments of past cycles. I appreciate your urgency about our profitability, but I think we’ll be just fine due to our strong understanding of social trends and the importance of convenient tech.

      • http://www.opentechalliance.com/ Robert A. Chiti

        Barrett, Thanks for the response. I can appreciate your opinion, being one of the many companies in your space. I guess the only thing we can do now is just wait and see how it plays out. Wish you all the best. Cheers