Owned by Santa Monica-based real estate firm The William Warren Group, storage operator StorQuest Self Storage has steadily grown from its SoCal beginnings into a network of 145 self-storage facilities across the country.
As developers churn out new facilities across the country, StorQuest is putting an even bigger emphasis on its third-party management platform than ever before. Many of the current storage developers aren’t interested in managing facilities, creating a frothy market for third-party management providers.
Demand for third-party management services in the sector appears to be on the rise if the actions of the industry’s biggest players are any indication. The major REITs are accelerating their third-party management programs as well, with CubeSmart noting it as an emerging focus area in its recent earnings conference call and Public Storage this year announced it was actively pursuing more third-party management business.
— StorQuest (@StorQuest) August 16, 2018
Ahead of the curve
For StorQuest, the company started to actively market third-part management services about five years ago when it acquired other existing management companies.
“In the last year, we’ve beefed up our push even more in that we have hired local regional development managers in particular markets who are helping us source additional management contracts,” said Tracy Sells, director of strategic partnerships.
Just under half (41%) of StorQuest’s portfolio of 145 stores are managed for third party owners. Sells says the bulk of the managed facilities have been added since 2013 through either acquisition or organic growth.
Now about 75 percent of the company’s new management deals are from new development facilities.
“We are a relationship oriented company, so it makes sense for us to build relationships with local developers. Sometimes it’s easier for someone with boots on the ground to build a facility rather than have no one in the market. We can couple their local knowledge with our self-storage,” Sells said.
The company also touts its success connecting with customers through social media and branding. They even have there own slogan: “Make Room For Awesome” that promotes the benefits of freeing up extra space in your home by using storage.
— StorQuest (@StorQuest) August 19, 2018
Business with benefits
Sells says the third party management business is a draw for the industry because of its strategic benefits.
“The third party management business in and of itself is not very lucrative in that we provide significant time and resources both in the field and at the corporate level to support those stores,” Sells said.
But managing stores provides additional non-economic benefits that make it worthwhile such as building brand awareness and economies of scale, Sells said.
As new self-storage development reaches its peak, more developers need help operating their facilities. Storage operators with management expertise are stepping in and competing to operate new facilities for a fee. As with the REITs, managed portfolios are sometimes eventual acquisition targets. That leaves the REITs and other enterprise-sized operators like StorQuest to compete.
“We’re usually competing with one or two other management companies,” Sells said. “We’re big enough to have the same sophisticated management systems as the large REITS, whether it’s revenue management or operations. We do it as well, if not better, in some aspects.”
“We are more engaged with our owners, more than they would get with one of the bigger companies,” Sells said.