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Can’t afford Canadian property? Downsize your home, upsize your storage locker

Garry Marr

National Post
December 7, 2013

Few people who rent a storage locker think they’ll keep it forever but maybe more of them should.

Real estate prices in Canada are at an all-time high while condominium units have never been smaller, making the need to find a spot to store your accumulated “stuff” more critical than ever.

“When people stop storing junk, I’m out of business,” says Mike Burnam, the chief executive of Columbia, Missouri-based StorageMart which came to Canada in 2007 and is now one of the dominant players in the country with 70 properties and about 5 million square feet. “My biggest competitor is the dumpster.”

The task for him and others in the self-storage community is to convince those people downsizing that they can do it without tossing their precious belongings.

Royal LePage says there will be demand for up to 32,000 new condo units in Canada’s three largest cities over the next 20 years to serve a huge segment of the population that, in all likelihood, will be facing more cramped quarters.

Research firm Urbanation Inc. says the average condominium sold in the greater Toronto area in the third quarter was 887 square feet, down from about 1,000 square feet just a decade ago.

If you want to get that extra 100 square feet back, it will cost you. Even relatively modest condominiums in key locations sell for $500 a square foot in Toronto or another $50,000 for space you might not need, especially if it’s being used for storage. You could rent that same 100 square feet for maybe $160 a month. Even at $2,000 a year, that is the same price you would pay in interest for an extra $50,000 in mortgage based on a 4% rate.

Still, self-storage is no easy sell in Canada. We simply haven’t taken to it over the approximate 50 years it has been around. There are 48,000 storage facilities in the U.S. and only 10,000 in the rest of world, says the Alexandria, Virginia-based Self Storage Association. About 10% of Americans have a storage locker compared to 1% of Canadians, say industry experts.

“They are much more penurious,” Mr. Burnam, says about the Canadians. “They are close with the buck or the loonie and only spend money when they absolutely have to. It’s not like red-blooded Americans who buy more crap than anyone in the entire world.”

There are no reliable statistics in Canada when it comes to the industry, which is made up of mostly “mom and pop” operations. Only 10% of storage facilities in the U.S. are owned by public companies and that percentage likely holds true in Canada which has about 2,500 buildings.

He thinks Canadians probably would be more receptive to self-storage if the price came down but government regulations here have restricted new development of facilities. “Red tape is part of it but development fees and permitting costs makes everything in Canada cost 25% more than in the U.S.” says Mr. Burnam. “I’d love to do something [in downtown Toronto] but the city has made it difficult.”

Short supply and costs, including  higher property taxes, ultimately mean storage locker rental is also 25% more expensive in Canada than in the U.S.

StorageMart’s average rent in the GTA is about $16 per square foot per year.

The other problem is people don’t want self-storage in their neighbourhood because it comes with a certain stigma. “I’ve built self-storage in some areas to make it look like townhouses [to conform with neighbourhoods],” said Mr. Burnham.
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Self-storage is a trend that grew out of the mobility of the United States workforce, as moves necessitated people leaving some stuff in storage. The problem is that oftentimes it just stays there, with the average stay some 42 months in StorageMart’s portfolio.

But is rental storage a permanent solution for crowded living? The growing condominium market in Canada, which the Royal LePage study says constituted 37.7% of all new dwellings in 2013 in the country’s three largest cities, makes for a ready-made market.

Some younger people moving into space as small as 300 square feet end up leaving stuff with mom and dad. But as mom and dad also downsize, they may be sentimentally attached to some belongings.

Some buildings offer onsite lockers for buyers but those are now considered an extra. In many condos the lockers are on title and can be transferred.

Shaun Hildebrand, of Urbanation, says those units can easily cost $5,000 and in some buildings there’s a secondary market for selling them. “I suppose you could become a minimalist,” said Mr. Hildebrand.

The lockers in condos are becoming like parking spots with more apartments than storage units, says Jamie Johnston, the broker/owner of Re/Max Condo Plus.

But Mr. Johnston increasingly sees a client base that doesn’t really want to accumulate as much sentimental crap. “Millennials don’t want to own stuff,” he says.

But if that generation wants to stay downtown in smaller condominiums and raise families, the question is whether their belongings will balloon.

“You expand to the space you are given,” says Mr. Johnston, who thinks people will simply learn to accumulate less as they become accustomed to smaller space.

It’s easier said than done. One of the triggers for storage is when a parent dies leaving you with a quick decision to pitch or come up with a “temporary” solution.

Steve Creighton, vice-president of Ottawa-based Dymon Storage, says his company is ready to bring storage to a new level. Dymon has about 1.5 million square feet in Ottawa and plans to expand to Toronto shortly.

The company’s concept is somewhat revolutionary for Canada in that it hopes to bring storage to consumers instead of sending them off to some industrial park to get their stuff. His lockers are located near big box retail malls or above the stores in what he calls a vertical integration.

“We’ve changed the concept of self-storage. Traditionally, self-storage facilities have been single-storey buildings with garage doors and a chain link fence,” says Mr. Creighton. “If your stuff didn’t matter that much it was the perfect solution.”

The idea is to create an atmosphere where the storage facility is almost like a business centre — there are boardrooms, shredding centres, packing facilities and a climate controlled atmosphere that even guards against humidity so family heirlooms can stay on site.

“People don’t have as much space for their stuff and they still need the space. Sometimes it’s seasonal stuff, sometimes it’s downsizing,” said Mr. Creighton.

His company has been developing the properties that have retail on the ground floor and then storage on upper levels, places where retail generally does not want to be.

“We are putting [storage] at high-traffic modes, usually adjacent to retail,” said Mr. Creighton. “You don’t just put your stuff in storage and leave it there for ever. You want access to it. You are out shopping and you stop in and drop some stuff at storage and pick some stuff up.”

Some consumers are buying into the idea. Sharron Woodstock, a business analyst, ended up using a storage unit after a relationship breakup but that was almost two years ago, and she’s not turning back.

“I was in transition,” says Ms. Woodstock, who has purchased a 1,700 square foot townhouse she plans to move into next year.  She says she didn’t need anything bigger because she can fall back on the storage locker when she needs more space.

“For the stage of life I’m in now with my daughter going back and forth to university, I have a townhouse with only so much room when she comes back with her belongings,” said Ms. Woodstock. “I can see people buying smaller [apartments] because they know they have storage.”

Posted on Saturday, December 7, 2013 at 12:22PM by Registered CommenterElaine in | CommentsPost a Comment | References1 Reference

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