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A place to stuff stuff

As we accumulate, without culling, we find ourselves in need of space. And providing that space has become big business.

By HELEN HUNTLEY, Times Personal Finance Editor
Published December 5, 2005

The holiday shopping binge is in full swing, which means many of us soon will be looking for some place to stash our new stuff - or the old stuff the new stuff displaced.

The self storage industry will be waiting for us.

Self storage is one of the fastest growing sectors of commercial real estate, with 38,817 facilities across the country, up 70 percent over the past decade. Florida has the third largest market, with 2,293 facilities, second only to Texas and California.

The state ranks high on the list thanks to a growing, mobile population, the near universal absence of basements and the sentimentality of residents like Angelique Hoffman.

The St. Petersburg artist pays $400 a month to store her extra stuff. There's military paraphernalia that belonged to her dad, toe shoes and costumes that belonged to her mom (a former ballerina), china that belonged to her grandparents, her own paintings and lots more.

"I hang onto things mostly because they have a lot of sentimental meaning for me," Hoffman said. "But I also have silly things in there, papers that are just a pain to go through, some pretty clothes that used to fit me when I was thinner because I might be thinner again some day. I have a big bird cage that was my high-school graduation gift 40 years ago."

She said she occasionally has tried to scale back her storage space, but quickly gave up the idea.

"I think I'm going to sort this stuff out, but it doesn't happen," she said. "I just move things around and put them back in. I keep hoping my son will make enough money to buy a house big enough to take some things."

Americans have gotten very adept at acquiring stuff, but like Hoffman, many of us are not predisposed to let go. Usually we just keep stashing more stuff in closets and the garage until we get ready to move.

Moving is just about always the catalyst for that first foray into self storage.

"People are selling their house and they have to get rid of the clutter, so they bring it here," said Dan Myers, who with his brother, Cliff, owns Oldsmar Self Storage and three other self-storage facilities in South Tampa and Wesley Chapel.

When people move, they often do it in stages, which means they need a temporary holding place for stuff. Once they've moved, they may find the new home doesn't hold as much as the old one. If they came from the North, they may decide their heavy, dark furniture doesn't fit their Florida lifestyle.

Just about every reason for moving is another storage opportunity. College students store stuff over the summer. Military personnel put stuff in storage when they go off to Iraq. Elderly people use storage when they move into assisted living or a nursing home. When a family member dies, the survivors put the house up for sale and stash the contents in storage.

A lot of what gets stored isn't worth the cost of the storage bills.

"Some people have real nice things," Myers said. "But a lot of it, they just need to go to the Dumpster with it and they'd save a lot of money."

Nationally, the typical customer pays $80 a month to rent a 10-foot by 10-foot storage unit, but Floridians who opt for air conditioned units may pay twice that. Myers said his monthly rents range from $1.25 to $1.65 per square foot depending on the facility's location. For long-term rentals, air conditioning is crucial if what's being stored is susceptible to mold, rust or deterioration from heat and humidity.

Commercial users make up about a fifth of self-storage tenants - businesses, professional offices and the self-employed. They store records, inventory, samples and equipment. Law offices and pharmaceutical company representatives are typical commercial tenants.

While self storage is a big business, most of the companies offering it are not.

"It's a highly fragmented industry with lots of potential for the future," said Paul Puryear, a stock analyst for Raymond James & Associates Inc. in St. Petersburg. He specializes in real estate investment trusts, a group that includes five publicly traded self-storage companies. Together the companies control about 8 percent of the self-storage facilities in the country.

Those stocks have been among the best performers in the REIT field and Puryear said he thinks the sector is very attractive.

"Consolidation will drive growth as the publicly traded REITs swallow the independent operators that currently dominate the landscape," he predicted.

There's already lots of merger and acquisition activity occuring. The largest self-storage company, Public Storage, is making a bid for the third-largest, Shurgard Storage Centers. Extra Space Storage and Prudential Investments combined to purchase the Storage USA facilities from General Electric. U-Store-It is buying facilities from National Self-Storage, Liberty Self-Stor and A-1 Self-Storage.

But the big guns still are outnumbered by the small operators. A big reason is that it's less expensive to buy, lease or build a self-storage facility than most any other type of commercial property.

A typical un-air conditioned storage facility is simply a long concrete block building divided into individual units of varying sizes with pull-down garage doors. A typical air conditioned facility is a large open building made of concrete block or steel. Inside, the floor space is divided into a warren of units with walls made of corrugated steel or pressed wood and ceilings of wire fencing or plastic netting to allow air circulation. Some facilities have multiple floors of storage space.

Gene and Sherry Pringle used their credit cards to start their business, Spare Room Mini Storage, in a failed shopping mall in South St. Petersburg eight years ago.

"We started out of desperation," Mrs. Pringle said. The couple had sold farm implements and raised cattle, soybeans and other crops in Minnesota and needed a new way to make a living in Florida.

Initially, they leased 20,000 square feet in what was Maximo Mall and built the individual units themselves as demand grew. Mr. Pringle said they went 21/2 years without a paycheck, working seven days a week to build the business.

The payoff: they now have 727 units in 55,000 square feet with only 40 vacancies.

But the Pringles and other self-storage operators say the business looks a lot easier than it actually is. Turnover is constant. The typical individual tenant stays a little more than a year and is on a month-to-month lease. With so many competitors vying for the business, it's a challenge to keep units rented.

When they launched their business in 1997, "demand for air-conditioned storage was greater than the amount of storage available in this area, but that has changed," Mr. Pringle said. "We've talked to people who have been in operation for two years who are still 50 percent full and it takes more than that to be profitable."

Once you've got the customers, you've got to collect the rent and keep them happy.

"Not every one pays on time and it's a constant battle collecting," he said.

Owners of storage facilities typically use a double-lock system. If a tenant hasn't paid, the owner's lock is added to the renter's lock so contents cannot be removed without a consultation with the owner. If a unit is abandoned, the contents can be auctioned off to pay the back rent.

Security is another major issue and many owners invest in security cameras and electronic gates or maintain on-site staff to sign customers in and out.

Analyst Puryear said that although it has been easy for people to enter the business, he thinks barriers to entry could become higher in the future. He said local government officials have a growing bias against self-storage facilities that's likely to make it more difficult to obtain zoning to build new facilities in desirable locations. The drawback, aside from aesthetics, is that the facilities create fewer jobs and generate less tax revenue than some other commercial uses.

In addition to traditional self-storage facilities, Florida also is home to a big business renting mobile storage containers. Portable On Demand Storage - better known as PODS - will deliver one of its containers to your home, pick it up when full and take it to a storage facility locally or across the country. In addition, the containers are sometimes used onsite to store items when a property is undergoing renovation. Local ordinances may restrict their placement.

The company, headquartered in Pinellas County, says it now has about 45,000 containers in service in 298 locations in 42 states.

Puryear predicts demand for storage will continue to grow, particularly in Florida. He said the concept has a growing appeal with people of above-average incomes. And even the Florida weather fuels demand.

"Believe it or not, hurricanes are good for the business," he said. "Last year after the storms came through the space pretty much filled up in the affected areas. People were looking for places to move goods out of damaged homes or when businesses came into town to do subcontractor work, they needed a miniwarehouse."

-- Helen Huntley can be reached at hhuntley@sptimes.com or 727 893-8230.

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