In this video chat, we are joined by Greg Ellsworth of Self Storage Consulting Group, Amy Bix of Toy Storage Nation and Terry Anderson of Tenant Property Protection to discuss nuances of the boat and RV storage sector. We’ll cover site selection, differentiators between class A, B, C and D facilities, development considerations and insurance concerns. Additionally, you’ll learn about how this tenant base varies from traditional storage customers with their expectations and tolerance for price increases. Tune in to learn about the booming boat and RV industry or read the full transcript below!
Alison: What criteria do you think investors should consider during site selection?
Greg: It’s important to keep in mind that self storage, specifically RV and boat storage, is not industrial class property; this is still retail and we need to keep in mind that drive-by traffic needs to be substantial as well as the amount of land that you’re acquiring. In traditional storage you’re looking at a lot less space–five acres or less, but in RV and boat we have sites that go on up to 32 acres. Acquiring land that still has drive-by traffic and yet has that much square footage available is not something a lot of traditional storage developers are used to. It’s important to keep in mind per capita income as well. We are targeting a higher per capita income than traditional storage. Then finally are the population numbers. Although in boat and RV storage you can still succeed on the fringe, it’s still important to have those population numbers at least in an area that the bank is willing to take a risk on that development.
So to recap, the important factors are drive-by traffic, per capita income and population numbers. Those are the three things that I factor in heavily when looking at site selection.
Amy: I’ve learned that with this market, this is an expensive undertaking and you always want to go to the experts. We’ve had some folks who’ve made some very expensive mistakes. I’m always very careful on certain things so I don’t know, I’ll connect you with the right person.
Alison: Whereas traditional self storage mile radius (for tenants) was three to maybe five miles, what mile radius are you looking at for RV and boat storage?
Greg: Boat and RV storage is unique in that you can collect rentals from multiple states. We have snowbirds in Arizona from northern states who store their vehicles here to keep them out of the snow. So when underwriting the project we will go 7 miles out to gather that data to substantiate development. A lot of this revolves around how the bank is going to underwrite the project. We have found that going out to 7 miles, the bank is still able to use that data, but going out to 10 miles they don’t feel it’s the direct market.
Terry: There are some outliers, though, especially in densely populated areas that where mileage can be farther out. We had an individual flying out from the East Coast to get to their RV in Seattle, which is closer to their favorite traveling destination, so destinations play into this also. Lastly, in site selection, there’s a variety that’s coming out, but what we’re seeing is Executive Class A level is very important because this clientele is coming in to build a community as well as protect what they are taking care of (their expensive RVs and boats) and that’s a significant very important asset.
We’ve kind of crossed over a little bit in the camping. and resort, and park area. Individuals that attend TSN (Toy Storage Nation) workshops are seeing a drop at campgrounds, resorts, and parks at certain times. At the same time, we can see that correlates with locations where storage is starting to grow. We know this is a tremendous field of opportunity, with over 25.5 million boat owners and over 14.5 million RVs out there and growing, so it’s a future massive storage opportunity.
Amy: In the past it used to be that RV and boat storage might have been just in the sunbelt area, but it’s really all over now. There is one factor that is really driving this: When people are going out to buy these expensive toys, they are not thinking about, “Where am I going to put this?” And HOAs are not allowing boats and RVs to be parked at home. So this is what’s driving a lot of this. Folks want to buy these toys to play with but don’t have a place to put them. It’s not specific areas of the U.S. anymore, though. It’s all over.
Terry: And Greg can probably speak to the planning and zoning in cities, where they are getting them off the streets.
Greg: Presenting a site with a good aesthetic appeal, whether it’s block or steel-enclosed facility, in order to take care of these assets is really the approach we like to take with these cities and show them pictures of examples of other projects that have gone through the process before. HOAs flat out will not allow RVs and boats in their communities, so we need to put them in a place where we can take good care of them. We’re finding this is becoming a lot more valuable in states (where we hadn’t been before like) Utah and Illinois where people don’t want their RVs and boats to be destroyed by the elements throughout the year.
Alison: I have to ask about your tenant level. If I’m storing a $2 million toy, it’s not just going to go anywhere. Can you talk about what constitutes the classes in terms of upgrading your facility and what impacts it and why? More specifically, what are the different classes of storage?
Terry: There are four D’s in the storage world, but that is changing. With RV and boat storage there’s a fifth D – and I call it Delight. In this industry, we’re not dealing with people through the typical self storage D’s: death, divorce, departure, or declutter. Owning and operating an RV and boat facility is a delight. And so are the tenants! And so is operating a storage facility for these tenants.
The old days of a chain link fence, razor wire, dirt lots, – these things are moving into the past. These tenants are interested in finding a place that can to address their concerns: How can I replenish my RV and how can I care for it? I need a trip charge. How can I keep the battery and tires alive? We’re not just looking at open lots, we’re looking at canopies and enclosed units – and so that level of service to be a Class A includes a secure gate, a keypad, concrete, and asphalt … all these amenities as well as ancillary services that will come into play.
Some offer concierge services, including anything from detailing to parking to having their vehicle all ready to go. Some have offices with a mini retail store – not only with chocks and oil plan, and but also RV Park ‘n’ Protection Coverage! gap coverage and protection. Gregg has developed a solar energy based trip charge to keep the battery going that doesn’t depend on electricity! This type of storage provides a strong vital family community service, which includes a place for kids and a doggy park. And so, Class A is taking on a whole new level. Class B would be a step down–maybe not as much enclosures or canopies and fewer amenities from that Class A., and Class C is back to the chain link fence, razor wire and dirt. We have about 3,000 Class A storage facilities in the country and growing.
Greg: You need to know what’s going to drive your rental rates. Think about the scenario of kids, dogs, wife and dirty clothes on the road. They need somewhere to clean their RV when they’re heading back – somewhere to make the return a better experience, Class A is providing convenience specific to RVs that justify a higher rate.
Amy: For TSN overall, we talk about Class A – amenities couldn’t be more on point. But it needs to be gated, fenced, covered in some way whether that’s paved or asphalt. Class B is not paved. Class C would be the old days of having your Rv stored on the back lot or maybe traditional storage. You really need the levels of security protection and convenience for Class A. If you’re not doing it somebody down the street will.
Alison: Can you talk about developing RV and boat storage facility compared with traditional storage?
Amy: The demand is there. A lot of folks are saying this is just driven by the pandemic and it’s going away. Did a lot of people buy more boats and RVs during that time? Yes. But it was already trending. You’re looking at the babyboomer generation where a lot of them are retiring sooner, they have a much more active lifestyle and they want freedom to go where they want. And, they have the income. Not only were people buying them, but during the pandemic there was a backlog of RVs from manufacturers. You can see the data at TSN (toystoragenation.com). So the need for it is there, and it’s really not going away. You simply cannot deny the need … so there are a lot of people getting involved. Now is the time to get into this industry! Exponentially you can find a market that is in need of it and HOA’s rules aren’t going away; they’re getting tougher.
Greg: In traditional self storage the concept was “build it and they will come.” That was the mantra in storage since the late ’70s, ’80s and ’90s, that self storage has always been underserved in many markets. In RV and boat storage, we really look at diversifying our unit mix to allow any type of tenant to rent from us. There’s enclosed boat and RV storage, covered boat and RV storage, and there’s potential for uncovered on pavement.
In our research, we see 30% of our tenants have traditional storage as well. You park your RV and take your bikes and put it in your storage unit. RV and boat storage are giving us more flexibility than ever before. Contractors and small business owners are using the RV and boat units for storage space right now because it’s less than traditional storage. (Also discusses how developing larger areas require more dirt work, above ground retention and below ground retention of water, to make the numbers work, factors that go into developing RV and boat storage as opposed to traditional self storage). The demand is there, but absolutely your pricing needs to follow that demand. For areas that lack RV and boat storage, rates should follow.
Terry: When you go to canopy structure, there is opportunity door is open to solar and allows a little income generation, and You also have the ability to adjust to the market. In some markets, covered is just fine, but sometimes enclosed or semi-enclosed is needed. There’s a difference in cost, it may be less cost but greater upside of rental. Steel has always played a factor in both industries, which is a challenge with inflation. I’ve noticed with management groups and experts in building RV and boat, if you have land, now is the time to get it ready. That extra square foot play is different income opportunity in the boat and RV storage sales and, can have certain returns.
Greg: Of the 40 million RVs owned in the U.S, 38% are owned by millennials. And over the 2015-18 time frame, ownership of boat and RVs increased by 3% in that demographic. So, younger crowds are buying and living and vacationing in these instead of doing international travel.
As far as developing, your numbers aren’t going to translate from traditional the same way …. A lot of infrastructure is going to be exposed so wood is just not an option.
Steel structures last longer, and there’s less to go wrong; there’s no door in a canopy unit. You have a roof, but it’s a different process.
Alison: Is there anything else about the expectations of tenant base that we should know? These tenants can spend more, we see, to protect their vehicles, but if demand starts to level off, if prices are too aggressive, they can just drive their vehicle off the lot. So what’s the sweet spot?
Greg: Yes, items are more mobile, because it’s not traditional self storage. But we go back to the supply and demand. We do feasibility studies so we have data that shows that tenants may store their RV yearvround and use it three weeks a year, combined. During that three weeks, they don’t move out of their RV unit, but they’re paying for it. There is such little storage out there, especially Class A, so if they only use it for a month, they’re probably going to stick around.
If they come back after the summer, they’re not going to find another spot. So there is a seasonality approach, but on the sites we manage in Florida and California, typically there’s a wait of one year on these waiting lists. So they’re going to maintain that rent even when they’re out.
Terry: Individual tenants, if they do travel, I’ve seen a variety of data on how long they’re out. But they don’t want to give up that space because down the road you’re not going to find that space. But there’s another factor: When they find the type of services that meet the needs of what they have, and you’re always trying to prove that, they’ll stay. We’ve found that they’ll stay during rate ups; they don’t want to leave that location because of the proximity to their house or to their destination and so they like that comfort and ease. That’s very important.
Longevity has a community aspect, too. We’ve seen people come together in groups at these places and like it. Some commercial vehicles are coming in here, even someone some owners who has have an Amazon or other delivery business and they like how nice and secure it is in these Class A RV & Boat Storage Facilities.
The vehicles are changing, electric vehicles coming into play, and driverless. We see a lot of changes in transportation, rideshare, and now more about RV share and boat share, so another whole world is opening up. The place that can be a central place for this to happen is an RV and boat facility.
Alison: Can you add to the importance of amenities and enclosures and security?
Amy: This is a demographic that buys these expensive vehicles and want safety, convenience and protection. They are going to be paying for those amenities, and they’ll be happy to be coming to your facility to do that. You’re not going to have trouble getting folks to pay; they’re often writing checks for the whole year.
Terry: It’s not just RV and boats going into these facilities. We’re talking trailers, and jet skis and the quads. Greg has about 1.000 vehicles on his lots, so he can probably talk about this more, too, because, There is this idea of having storing your sport, your activity, your hobby-release, and going out with your family. I saw one full of bikes and motorcycles. So you have a whole different play in this arena than others.
Greg: You can have a boat with three owners, so you have three guarantors on that rent. If you have a sandcar to go to the dunes, you want to have it near your friends. So we’re developing sites with a reception area in the office for these individuals to meet and hang out and then go out to their vehicles. It’s a congregation area for them and they’re happy when they come, not like when they see their wife’s Christmas decorations or the husband’s golf clubs (like self storage), but they’re happy.
They also don’t want to go delinquent on everything they’re storing at the site (so they rarely miss rental payments).
Alison: Do you have any idea of what the average length of stay is for a tenant?
Greg: We’ve actually seen tenants who will store for 20 years and never use that vehicle. We have jetski trailers that have been sitting there since 1995 and it hasn’t moved, but they’re not willing to get rid of it because it’s grandpa’s jetski. But they will store, year after year. Whether or not a vehicle is lost in bankruptcy or repossession, that vehicle still needs a home. So whether or not the bank will option it off or sell it, the new owner will still need to put it somewhere. So that unit may change hands but the unit maintains occupancy of that vehicle.
Terry: I’ll add that well over a million people are living in RVs and variety of sprint vans. I don’t know the exact number. But they are living behind an extra vehicle or things they need to leave behind and they like to leave it in one location. So they’re going to stay there because of the convenience. It’s really important for these individuals to keep (their stored belongings in a permanent location) and continue to travel.
Alison: These are very impressive assets. Is it a tough sell on tenant insurance?
Terry: One of the greatest assurances you’ll have with this are two things: inexperienced drivers who will knock hit your buildings, around and your gate, and keypad. It is a problem. Your general P&C (Property and Casualty Insurance) is going to be tapped. You have to think and plan it through how wide your aisles are for making turns, etc., so it’s really important to have someone like Greg come in and do a really good site plan. Also, fires, that is a big play coming around; you’re seeing more and more and have to make sure people are very cognizant about what and how they store, like batteries, and what materials they’re leaving behind, and so we want to be very careful from a general P&C side.
You want to make sure when you have 500,000 of liability sitting in one space you know what you’ve got there at the end of the day. You need to have boots on the ground when people are coming in … you need to have eyes on it. Also from a protection standpoint, it’s very important to know that a lot of these vehicle owners are there for a long time. They can downgrade their vehicle coverage – sometimes all the way down to where it’s just liability, so if they do something to their own vehicle, and there’s no comprehensive or collision coverage, they might look for someone to blame. So we (our RV Park ‘n’ Protect Program) have entered into that phase now.
You need to make sure that tenants know that when they rent space, their responsibility is coming in and out of the property safely, and ensure that they are storing goods safely. By the way, we have a program, RV Park ‘n’ Protect, that can protect you when you come in that gate: It will protect you from dings and scrapes and mirrors being pulled off; it will protect you at the end of the day (within the three plan levels/deductibles). The bottom line is we have to have a product to cover those things and provide a deductible reimbursement – RV Park ‘n’ Protect. And then there’s content coverage for other things that get stored inside RVs like a computer or generator … (discusses more details about police reporting, etc., and protection for supplemental items).
Amy: You’re dealing with very expensive toys and people who are inexperienced moving them around, so it’s a nice service and/or product to offer to folks insurance at your facility, for sure.
(Terry and Greg discuss animatedly about AI and Go Pro security.)
Greg: It’s important to know that you’re inviting people onto your lot with 100s of gallons of fuel (self storage prohibits storage of such), so it’s important to have the right protection in place. The right P&C is huge (reviews canopies, sprinklers and losses, with regard to plans approved by the city). It’s important to talk with someone on how to insure these within your jurisdiction so you get paid if there’s a claim.
Amy: It goes to show how much goes into an RV and boat storage facility. There are so many different aspects whether you’re talking financing, construction, feasibility, software, the gamut, that’s what this group (TSN) is coming together to provide this information through workshops. There are so many pieces of it. The other thing we’re seeing is that 70% of people coming to workshops are completely new to storage, so it’s a whole new group of people coming into this industry that have never had outside previous storage experience.
Alison: You’re absolutely right. There’s so much to think about.
Amy: To be connected with people who are experienced in their different areas that can walk you along–that’s what we’re trying to provide through our website or the events that we have. The folks that are getting into this industry are needing their hands held and they are very grateful to have the assistance that people like Greg and Terry provide to people just getting into the market.
Terry: There are topics that we didn’t even scratch here. We can talk about feasibility studies, the funding side, the legal side, leases, insurance, ancillary services, lighting packages, that you can discuss during that day at the workshop. It’s also very key that you’re building your site with managing it in mind, not just build it and put it out there. You have to have a whole marketing and management concept, which you get when you come to TSN workshops and build your advisory team!
Greg: Hiring the old professionals that know traditional self storage is not going to translate directly to the RV and boat storage industry. We look at it from the end user standpoint, which is operations, and we are able to decrease costs–by looking at the endpoint and building around that. We start as early as in the feasibility study by gathering data on the unit demand in that market, then draw our site plan on the parcel that we want. Once we have the site plan, we build our financial projections on that site plan and then go into architectural design.
More Information
Greg Ellsworth’s contact information can be found at sscg1.com.
Terry Anderson can be reached at tanderson@tenantpropertyprotection.com. Company websites: tenantpropertyprotection.com and RVgapcoverage.com
Amy Bix can be contacted at amy.bix@toystoragenation.com, 602-909-3910, Toystoragenation.com. “Look for lots of content and information about our workshops, our first of which will be in Las Vegas, April 14, in cooperation with ISS. Go to our website’s ‘Events’ page to sign up for information about future workshops.”
To reach Alison DeJaeger: Alison@listselfstorage.com, 248-795-8126. “Visit ListSelfStorage.com, our new platform for buying and selling RV and boat storage, self storage, development and conversion properties for sale.”
Participants
Greg Ellsworth, Member of the Toy Storage Nation Advisory Board, and President and Founder of Self Storage Consulting Group, specializing in third-party management of storage properties across the United States, with a wide range of experience consulting through the entire development process, including due diligence, feasibility, design, construction and operations. Focused on developing the most profitable sites by building properties based on data prior to development.
Terry Anderson, Chairmen of the Board at Toy Storage Nation, President and CEO of Tenant Property Protection, providers of insurance products and services specific to self storage, RV and boat storage.
Amy Bix, Director of Sales for Toy Storage Nation, The Independent Voice for the RV and Boat Storage Industry and a resource for people venturing into the business or industry veterans, offering a website with a compendium of content and comprehensive workshops that give the A-to-Z on how to get into the market, as well as achieve and maintain success.
