As the self-storage sector continues to evolve, technology has become an essential tool for improving operations, enhancing customer service, and streamlining processes. One of the most critical aspects of managing your self-storage investment is accurately assessing what creates value. However, despite the advantages that technology brings to self-storage valuation today, the importance of human insight and touch remains crucial.
The role of technology in self-storage valuation has always been important, but experience, expertise, and local knowledge are critical today to ensure an accurate valuation of your self-storage investment. Self-storage valuation traditionally involves a series of calculations, market rent comparisons, and projections based on the location, submarket demand, and condition of the property. With the advent of new technologies, this process has become more efficient, accurate, and data-driven. Several technological tools have emerged that help owners and managers determine the value of their storage spaces, and these tools are increasingly making the valuation process more accessible and reliable. However, if you are not careful to understand the local market, rapidly changing capital markets, REIT unit pricing strategies, ECRI cadence, and local demand drivers, these tech-driven valuation tools have the potential to lead you astray.
Big Data and Analytics
Big data has revolutionized many industries, and self-storage is no exception. With the help of analytics software, self-storage operators can access a vast amount of data about local market trends, competitor pricing, customer demand, and even historical occupancy rates. By analyzing this data, operators can predict future trends and make more informed decisions about unit pricing, ECRIs, promotions, and investments.
For example, off-the-shelf platforms like StorTrack, ProRize, and VeriTek allow self-storage operators to track real-time data on rent prices, occupancy rates, and seasonal demand in their local markets. Many of the larger, more sophisticated operators have built out customized internal dashboards that allow them to collect, compare, analyze and modify these data sources in real time and make more informed decisions on investment opportunities. These platforms gather data from a variety of sources, such as competitor rates, local demographics, and trends in the housing market, to provide real-time insights that influence pricing strategies and help predict market conditions.
Automated Valuation Models
Automated Valuation Models (AVMs) are another technological innovation that has transformed how self-storage facilities are valued. Originally designed to value residential real estate, AVMs are algorithms that use data and statistical models to estimate the value of a property based on various factors such as location, submarket rental rates, property size, age, and amenities. As their use expands to the valuation of commercial properties, these models typically draw from large databases of sales data, property features, and market conditions to provide a quick, objective valuation. AVMs can provide a rough estimate of property value without requiring a physical inspection or involvement from a human. This speeds up the valuation process and reduces costs, especially when evaluating multiple properties or managing large portfolios of self-storage facilities. However, while AVMs provide valuable insights, they do have limitations, especially when it comes to unique or unconventional properties or when data is sparse. This can lead to valuations that are as much as 20%-30% off. Don’t let an AVM lead you down the wrong path and make you look foolish. This can have meaningful consequences, whether the AVM overvalues your property (overpricing is not harmless), or even worse, undervalues your property. Contact your local Argus broker, and they can help customize your valuation using their local knowledge and expertise to make and make sure you are maximizing your value.
The Human Touch: Why It’s Still Essential
While technology has undeniably transformed the self-storage industry and made property valuation more readily available and efficient, the human touch plays a crucial role in the process. Technology excels at processing large amounts of data and identifying trends, but there are nuances and complexities that only human experience and expertise can address.
Data alone can’t provide a full understanding of a property’s value. Local knowledge and expertise allow us to interpret the data in context. For example, an AVM might suggest a high valuation for a particular property based on its proximity to high-demand areas, income levels, etc. However, a seasoned self-storage professional may recognize that the area is prone to flooding, is on the other side of a geographic barrier such as a river or highway, or the facility has features such as narrow drive aisles, which could negatively affect the facility’s long-term value due to a poor customer experience. Expert evaluation can also factor in the intangible elements that technology might overlook, such as the reputation of the facility, customer satisfaction, and the history of its operations. These subjective elements can significantly influence how valuable a property is perceived to be in the marketplace.
Building Relationships and Trust
Valuation is not only about numbers; it’s also about relationships. Self-storage facility owners and managers often rely on trusted professionals, such as brokers, appraisers, and financial advisors, to guide them through complex valuation decisions. These professionals bring experience, intuition, and local knowledge that technology cannot replace.
In many cases, buyers and investors will want to discuss a potential investment or valuation with a local industry expert who can answer questions, explain the reasoning behind the numbers, and offer insights that go far beyond the data. Experienced brokers are also crucial in handling negotiations, managing emotions/expectations, and building trust with customers that automated systems cannot replicate.
Customizing Solutions for Each Self-Storage Owner’s Needs
Every self-storage facility is different, and a one-size-fits-all approach to valuation doesn’t work. While AI and AVMs can provide general estimates, industry experts can customize their evaluations based on the specific needs of a facility or client. Whether it’s considering long-term investment potential, designing tailored pricing strategies, or evaluating the unique characteristics of a facility, expert insight adds a layer of adaptability and personalization that technology lacks.
The intersection of technology and the human touch in self-storage valuation represents a powerful partnership. Technology enhances efficiency and data analysis, while human expertise adds context, intuition, and personal insights. As the industry continues to evolve, finding the right balance between these two elements will be key to driving growth and success in the self-storage market.
Technology will continue to play an integral role in streamlining processes and providing data-driven insights, but the human touch will remain indispensable in interpreting complex situations, building trust, and offering a level of personalization that machines simply cannot replicate. By leveraging both, the self-storage industry can continue to thrive in an increasingly data-driven world while preserving the value of human expertise and relationships.
Source: Ben Vestal, Argus Self Storage Advisors
