Life Storage is dipping its toe into an emerging segment of e-commerce — micro-fulfillment.

The self-storage REIT’s Warehouse Anywhere e-commerce platform has teamed up with San Francisco, CA-based Deliverr, a tech-enabled fulfillment service, to open one micro-fulfillment center at a Life Storage facility in Las Vegas and another at a Life Storage facility in Chicago. Both centers are supposed to be up and running in time for the holiday shopping season.

During Life Storage’s third-quarter earnings call Nov. 6, CEO Joe Saffire said Warehouse Anywhere’s first micro-fulfillment center — in Atlanta — is handling about 300 to 350 packages a day. Saffire said the Las Vegas and Chicago centers are part of a pilot project with Deliverr.

Saffire noted that none of Life Storage’s rivals have entered the micro-fulfillment space.

“I want investors to realize that if they invest in Life Storage, some of that is in the tech-enabled fulfillment space,” he told Wall Street analysts.

“Knocking down some walls”

To make room for the micro-fulfillment setups, Life Storage is “knocking down some walls” to carve out 5,000 to 8,000 square feet within existing facilities, Saffire said. By comparison, traditional fulfillment centers typically range from 50,000 square feet to 3 million square feet.

Andy Gregoire, chief financial officer of Williamsville, NY-based Life Storage, said rent and profit per square foot for micro-fulfillment space are “much higher” than for traditional storage space. However, the higher rent and profit are offset by higher costs for fulfillment operations, he added.

The micro-fulfillment initiative is the latest development for Warehouse Anywhere, a subsidiary established in 2016. The subsidiary offers third-party logistics and warehousing services through a nationwide network of more than 10,000 storage locations.

“Cheaper and quicker” delivery

Data and analytics provider CB Insights says micro-fulfillment enhances fulfillment, packing and delivery of online retail orders. Micro-fulfillment combines the speed of in-store pickups with the efficiency of automated fulfillment warehouses, according to CB Insights. Putting micro-fulfillment centers in cities “can substantially reduce the distance between an ordered product and a customer, making last-mile delivery cheaper and quicker,” the company says.

Among the companies that have embraced micro-fulfillment are Amazon, Walmart, Apple, Nordstrom, PepsiCo and Albertsons.

Micro-fulfillment centers feature two components, according to CB Insights: software systems that process online orders, and robots for picking out items from storage and carrying them to human workers.

Other highlights of Life Storage’s third-quarter earnings report include:

  • Same-store revenue climbed 1.2% to $126.4 million compared with the same period last year.
  • Same-store NOI increased 0.4% to $84.3 million compared with the same period last year.
  • Same-store operating expenses jumped 2.7% to $42.1 million compared with the same period last year.
  • The REIT purchased 25 facilities for $326.7 million.
  • Same-store move-ins in October were 7.6% higher than the same period a year earlier, while same-store move-outs in October were 4.4% higher.
  • The third quarter ended with a same-store occupancy rate of 93.2%, up from 90.3% a year earlier.
  • Life Storage added 30 facilities to its third-party management platform.
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John Egan