We live in exciting times! The self-storage industry is going through some significant transformations. With new-facility development being stagnant, self-storage operators are turning their attention toward improving their current business and looking at new technology to help them.

Historically, the self-storage industry has been slow to adopt technology, but this is changing. Many of our leaders are younger than 50 years old and have grown up using technology in their everyday lives. This new breed of operators is not afraid of technology. They're open to trying and learning new ways of running their business, with the objective of improving their bottom line.

There are a few interesting technologies coming of age that, if used properly, can have a positive impact on your facility revenue. Let's take a look at them.

The Cloud

Like any new technology, "the cloud" has multiple definitions, with each slanted to serve the agenda of the company that created it. Heres tech giant Intels definition:

Cloud computing is an evolution in which IT consumption and delivery are made available in a self-service fashion via the Internet or internal network, with a flexible pay-as-you-go business model and requires a highly efficient and scalable architecture. In a cloud computing architecture, services and data reside in shared, dynamically scalable resource pools, often virtualized. Those services and data are accessible by any authenticated device over the Internet.

Microsofts TV ads say, You should go ... to the cloud while youre stuck in an airport waiting for your delayed flight, for example. No matter how you define cloud computing, it can deliver some valuable benefits to the self-storage industry, if implemented properly.

One of the key benefits of the cloud is data protection and global accessibility because all data is stored in a secure offsite location. Self-storage operators use a lot of forms that are all typically printed and stored in filing cabinets at the property. A simple-to-use, cloud-based document-management service could help operators save money, run a more green business, and have a better handle on lease agreements. Cloud computing means the option of going paperless at a self-storage facility is much closer to a reality.

Another cloud benefit is reduced need for local IT (information technology) staff. This is a by-product of not having to install, backup, update or uninstall software on local computers. The cloud vision is that any device that connects to the Internet will be able to use the services provided and access the data stored in the cloud. Therefore, local devices will not store any data and will be simple to replace if the device fails.

The pay-as-you-go benefit is the one many people feel is going to drive significant cost savings, but not everyone is convinced. While this model does eliminate most of the upfront software costs, it may not equate to savings over time.

Scalability is one of the primary benefits of the cloud. It doesnt mean users can use as much resources as they want, but it does mean that when they need more, all they have to do is pay for them. This means no more running out of hard-drive space or upgrading computers that need more memory to run new software.

Live Video

Since the beginning of time, self-storage has been a face-to-face business. Interacting with a live person behind the counter has been the core of all processes. Live video is not new, but it has required very expensive onsite hardware and software and lots of bandwidth. Advances in streaming video technology are also, ironically, cloud-based. These new cloud video services are significantly reducing costs and no longer require onsite proprietary hardware. Live video will put a new twist on the term "face to face."

Skype is a great example of this new technology. It allows people to collaborate in person in the cloud. Todays self-service kiosks have recently replaced their old-fashioned speaker phones with VOIP (voice-over Internet protocol) phones, allowing a live person to assist a consumer at a kiosk. Some self-storage operators find live video gives them a way to supplement the staff at their facility with a virtual manager, saving them the cost of having a real person at the facility.

Live video will not stop at kiosks. It will soon be used to provide human assistance to website visitors as well. The effectiveness of this assistance is still to be determined. Live chat has been around for many years and has not yet become a frequently used service, nor has it been attributed to more rentals on the Internet.

Call-Center Services

Advancements in technology are empowering remote call centers to be as, if not more, effective than onsite managers when it comes to handling sales calls. The real estate storage trusts (REITs) have been routing all incoming calls to their call centers for a few years now, and they claim to be winning more business from their competitors because of this approach. Just think about it: If you never miss a call, never have to put a prospect on hold or need to call him back, youre going to win more business and improve facility revenue.

Routing all calls to a central site is not a knock on the manager, who handles many tasks that often take him away from the counter. Some tasks, like dealing with an angry customer or making collections calls, can put a person in a mood not suited for handling a sales call. Until a few years ago small- to mid-sized operators had no way to compete with the REITs. Now some call centers offer similar services without hidden costs or transaction fees.

Admittedly theres always going to be a knowledge gap between what the onsite manager knows and the information available to a call-center representative, but in some call centers, technology is closing the gap. The new technology includes real-time integration between self-storage property-management systems and call-center software applications.

In addition, some call-center vendors offer an Internet portal to allow managers to share facility content in real time with the call center. This way, the call-center representatives are updated immediately of any changes at the facility. The facility content includes landmarks, directions, special pricing, etc. The portal narrows the knowledge gap but, more important, it provides the onsite manager and the call center a channel to collaborate, which helps develop an atmosphere of teamwork.

Self-Service Kiosks

Self-service technology is rapidly evolving. Prices for the hardware componentthe kiosk itselfare getting less expensive, as are their respective service and warranty programs. There are now many kiosk models from which to choose, each ranging in price (starting at $5,500) and functionality. This technology continues to provide a cost-effective option to having a part-time manager on staff, and it significantly expands the hours of operation of the facility giving it the potential to rent more units.

Software on the kiosks is also getting simpler to use and can do more. Using VOIP technology, kiosks now offer a live person to assist the user in renting a unit or making a payment. The live person provides the personal touch, and soon kiosks will support two-way video so the consumer experience will be much like that of the traditional in-person interaction.

Some kiosks will soon be able to help self-storage owners improve their search-engine optimization. Tenants will have the ability to create video reviews (testimonials) on a kiosk, which can be directly uploaded to YouTube. Self-storage operators will be able to select which videos they wish to make public.

Expect self-service technology to become hardware agnostic and be delivered in a software as a service model from an industry-specific cloud. As consumers start to rent self-storage units over the Internet, from their mobile phone, on their TV or even from their car, self-storage operators who still think consumers must rent from the onsite manager will see the impact on their bottom line.

The most important thing to remember when thinking about new technology is not the technology itself, but the reason for implementing it. Its best to first clearly understand the business problem and then research solutions, instead of getting enamored with a solution to a problem you may not even have. Technology that solves business problems will positively impact your facilitys revenue. On the other hand, implementing technology just because its cool may make you cool, but it will not make you rich.

Robert Chiti is president and CEO of Phoenix-based OpenTech Alliance Inc., the developer of the INSOMNIAC line of self-storage kiosks, now with seven models. The company also offers the INSOMNIAC Live! call center and the INSOMNIAC Self Storage Network for online storage reservations and rentals. For more information, call 602.749.9370; visit www.opentechalliance.com .

The board of directors for CubeSmart, a self-storage real estate investment trust, declared a quarterly dividend of $0.08 per share on the companys common stock for the fourth quarter of 2011. The dividend is payable on Jan. 15 to stockholders of record at the close of business on Jan. 1.

The quarterly distribution represents an annualized dividend rate of $0.32 per share, a 14 percent increase from the previous annual rate of $0.28 per share. The board also declared a quarterly dividend of $0.3929 for the 7.75 percent Series A Cumulative Redeemable Preferred Shares payable on Jan. 14 to holders of record on Jan. 1.

We are very confident that our success during 2011 in growing our occupancy and net operating income, improving the quality of our portfolio and strengthening our balance sheet will create strong growth in our free cash flow next year and beyond, said CEO Dean Jernigan. Our balanced dividend policy will continue to allow the company to retain internally generated funds that we intend to utilize as a component of funding for our external growth strategy."

CubeSmart owns or manages 473 facilities across the United States and operates the CubeSmart Network, which consists of approximately 877 additional self-storage facilities.

The Inside Self-Storage World Expo in Las Vegas, March 14-16, will feature three new seminars highlighting self-storage on the international front. Two will be presented in Spanish. The third is a panel discussion of self-storage experts from around the world.

Cristian Batres of Storage Structures Inc. will present a seminar in Spanish about construction and development in Latin America. It will be followed by a Spanish-speaker seminar on operations and facility management, presented by Lucia Darnell of PhoneSmart. Both presenters are members of the Latin America Self Storage Association.

The international panel will include industry professionals from various regions including Australia, Canada, Hong Kong, Japan and others. Topics include self-storage development, marketing, operations and trends.

The ISS Expo, held at the Paris Hotel & Resort, provides two days of product and service exhibits, several networking events, multiple education tracks and symposiums, and more. Details are available at www.insideselfstorageworldexpo.com.

By Ben Vestal

If youve read the latest news coming out of the self-storage industry, its apparent that the fundamentals of the self-storage business are sound. With all four of the major self-storage real estate investment trusts posting positive growth numbers over the same quarter this past year, its clear the industry is poised to move forward.

Based on my conversations with self-storage owners, there are three main topics on their minds as we close out 2011:

• Operations: What is driving revenue and how
• Investor activity: Who is buying and how they are valuing properties
• Capital markets: The kinds of loans available

These three topics are influencing the opportunities in todays market whether youre a buyer or seller. Lets take a look at each.

Operations

Recent industry chatter has been focused on revenue management, search-engine optimization, call-center conversion rates and rebranding, just to name a few popular topics. As the self-storage industry has matured over the last decade, weve seen an accelerated sophistication with regard to facility operation. This has led to increased revenue growth in recent years, even when the market has struggled. The more sophisticated owners are able to squeeze out 1 percent to 3 percent more in revenue than small, less experienced operators.

We have come to the realization that the Yellow Pages is not slowly going away; it is, for all practical purposes, gone and not coming back. The Internet is now the focus of all major storage operators, with every move-in and click on the Internet tracked to ensure the investment of each advertizing dollar is maximized.

Call-center conversion rates are also rising faster than anyone ever expected, and it does appear that if you train someone to do a specific job and he does it over and over again, hell become better at closing the sale, even if hes sitting in Phoenix and the property is in Boston.

Third-party management is here to stay, and we will see several of the small to mid-sized operators joining forces with the larger, more sophisticated operators in the coming years. This will allow the smaller investors to gain access to tools needed to grow their revenue and, ultimately, their bottom line as this once niche market develops in to a tighter and more competitive mainstream market.

Investor Activity

Investment in the self-storage space has increased over the last 12 months, with a few new investors dipping their toes in the water. The majority of the investment activity has been from mid-size to large institutions looking to buy stabilized properties in major markets, with some reaching to second-tier markets for an increase in yield of 25 to 75 basis points. Smaller investors looking to purchase assets with a market value of less than $2.5 million are still struggling to find suitable financing and deals that make financial sense.

However, weve recently seen a few smaller, well-capitalized, experienced operators taking advantage of the tremendous opportunity presented by smaller properties that are not being actively chased by the larger institutions. This has allowed smaller, well-capitalized operators to acquire well-located and under-performing properties with considerable upside.

Many of the owners/operators who are considering selling to the institutional buyers are struggling with the bigger guys expense structure. Many of the companies that have the capability and desire to purchase large, single assets of $4 million-plus or portfolios of $10 million-plus have internal underwriting criteria that increase the operating expense structure, which in turn decreases the net operating income. Therefore, it also decreases the value the owner has calculated using his own operating expenses.

This has led several of these larger institutions to pitch their third-party management services with the assurance that they will increase revenue and value, all while they apply the additional operating cost to the property and the current owner. This also allows them to operate the property and identify the pros and cons before actually purchasing the asset, not to mention it changes the owners leverage when negotiating the sale.

This is apparent, as most of the larger operators in the business are reporting 25 percent to 60 percent of all new acquisitions are coming from their third-party management business. I do believe there are several well-run third-party management companies that also own properties and are looking to expand their portfolios. It has been my experience that many of these companies do add value through their revenue-management systems, online marketing and call centers, but Ive also learned theyre typically not the highest bidder when the properties go to market for sale.

A word to the wise when considering selling your property: The only proven way to keep everyone honest and maximize your investments rate of return is to create market competition by listing the property for sale and let the market dictate the value. You owe this to yourself and your partners. Remember, you realize 90 percent of the value of your investment when you sell.

Capital Markets

With the recent volatility in the market, self-storage financing has been clumped together with the rest of the commercial real estate financing market as banks, commercial mortgage-backed lenders and life-insurance companies struggle to pinpoint spreads, i.e., interest rates. This has made pricing self-storage loans very difficult. Much like the investment sales market, the bigger the better also holds true in the self-storage financing world. You will find more aggressive terms and interest rates as you see the loan amounts increase.

However, self-storage as an industry has performed very well. If your property has a defendable operating history, you should be able to obtain competitive financing with one of the sources mentioned above. Weve also seen loan brokers adding value to their clients negotiations. The value of having professional advice in a turbulent market can add a tremendous amount of value when negotiating the terms of your loan.

Yes, I said negotiate the terms of your loan. Some self-storage owners may not be aware their loan termsinterest rates, term, amortization, prepayment penaltiesare negotiable.

The most important aspects to focus on when negotiating your loan are the term of the loan and the prepayment penalties. First, with interest rates near historical lows, youll want to get as much term on your loan as possible. Were seeing loan terms in the 5- to 10-year range, and weve also seen some fully amortizing loans with interest rates in the 7 percent to 8 percent range. This will allow you to mitigate any unforeseen refinancing risk, as were most likely going to experience interest-rate expansion in the future.

Second, over the past 10 years, weve seen average cap rates range from 7.5 percent to 10-plus percent, so when youre negotiating your loan, make sure youll have the ability to sell to capitalize on the current market conditions. Youll make more money buying and selling at the right time than you will ever make by renting more units or improving your operating procedures.

Nows a great time to be in the self-storage business, but owners and investors need to keep a close watch on the topics discussed above to make sure theyre maximizing their opportunity.

Ben Vestal is president of the Argus Self Storage Sales Network, a national network of real estate brokers who specialize in self-storage. Argus provides brokerage, consulting and marketing services to self storage buyers and sellers and operates SelfStorage.com, a marketing medium and information resource for facility owners. For more information, call 800.55.STORE; e-mail bvestal@argus-realestate.com.

In this issue:

• Self-Storage in Japan: Steve Spohn, president of QURAZ, Japan's largest self-storage operator, discusses the state of the industry, its big industry players, unit sizes and rates, business models, and how it all compares to the U.S. market.
• Challenges Facing Japanese Operators: While demand for self-storage in Japan continues to grow, operators face numerous obstacles, including public awareness.
• Update From Down Under: Dallas Dogger addresses the state of self-storage in Australia and New Zealand, explaining that while growth and occupancy have been quiet in 2011, the outlook for 2012 is sanguine.
• The Philippines' First Self-Storage Facility: ISS speaks with Carlo Coronel, an owner of Safehouse Storage, about product awareness and future competition.
• Self-Service Storage in Latin America: Though self-storage is young in this region, the business growing with support from an expanding customer base and an industry-specific association.
• United Kingdom Snapshot: An overview of self-storage growth, performance, marketing and more.
• Self-Storage in South Africa: With a lack of professionalism and sophistication, and low public awareness of the product's benefits, self-storage has a way to go before it reaches the next stage in its development lifecycle.
• Thailand's MY STORAGE: Nestled in a mixed-use development, this self-storage operation in Patong, Phuket, tackles development and operational challenges.

The growth in the self-storage market in Asia is being driven by the trend in smaller homes and the high cost of retail space.

Entrepreneurs are turning to self-storage to house their wares rather than setting up costly storage fronts and signing long-term contracts. Some business owners even use the self-storage space for showrooms.

The trend for smaller homes is also driving the growth, as homeowners are using self-storage to store seasonal or hobby items, extra furniture or other belongings.

Hong Kong-based Storefriendly, opened its first Singapore branch this week.  The company has 90 stores through Hong Kong, China and Macau. On average, Storefriendly opens a new franchise every month, and aims 25 operating across the country by 2014. The company estimates the self-storage market could be five times bigger in just a decade.

Several other operators also have plans for development. StorHub self-storage, which has six facilities in Singapore will build a seventh store next year. Lock+Store self-storage, which has facilities in Bedok and Chai Chee, recently expanded its Tanjong Pagar facility by 38,000 square feet.  

To read more about the booming Asian market, download the Inside Self-Storage International digital issue.

Inside Self-Storage magazine has released its 2011 International Issue, now available for free via download at www.insideselfstorage.com/digital-issues.aspx. It is the first time this annual supplement edition of ISS is being offered in a feature-rich digital issue that provides simple navigation and search capabilities as well as quick access to advertiser info.

ISS International examines the development and performance of self-storage facilities in markets around the world. The publication includes an analysis of the Japanese self-storage market, including a comparison to the U.S. industry and unique business challenges faced in that country. It also addresses the state of self-storage in Australia/New Zealand, Latin America, the Philippines, South Africa, Thailand and the United Kingdom, with articles contributed by experts in those regions.

To download the issue, visit www.insideselfstorage.com/digital-issues/2011/12/inside-selfstorage-international.aspx.

For more than 20 years, ISS has provided informational resources to self-storage owners, managers, developers and investors. Its educational offerings include a monthly magazine, bi-annual tradeshows, an extensive website, an education institute and Self-Storage Talk, the industrys largest online community.

A permit application to operate a crematorium at a self-storage facility in St. Thomas in the Virgin Islands has been put on hold.

The proposed crematorium would occupy two self-storage units in the southernmost buildings of Fortress Self Storage Warehouse. The owner of Davis Funeral Home requested the postponement so he can gather more information.

St. Thomas currently doesnt have an operating crematorium, forcing residents to travel to Puerto Rico for the service. The proposed crematorium would house a propane-fired chamber heated to at least 1,800 degrees.

The funeral home owner has been met with some opposition from other renters at Fortress Self Storage Warehouse. The facility has a number of tenants including a dance instructor, a bakery, two salons and others.

Self-storage real estate investment trust Extra Space Storage Inc. has restructured its executive management team.

In the third quarter of 2012, company founder and board member Kenneth M. Woolley, who formerly served as CEO and board chairman, will assume the role of executive chairman of the board of directors and chief investment officer. Woolley has been involved in the self-storage industry for 34 years and has extensive background in acquisition, development, joint-venture structuring and operations. He is returning from a three-year sabbatical volunteer mission for the Church of Jesus Christ of Latter-day Saints.

Spencer F. Kirk will continue to serve as CEO and as a board member.

In addition, Kent W. Christensen relinquished his role as executive vice president and chief financial officer as of Dec. 5. He will be replaced by Scott Stubbs, the former senior vice president of accounting and corporate controller. Stubbs has been a member of the senior management team since joining the company in 2000. He is a licensed CPA with a master's degree in accountancy from Brigham Young University.

"We have appreciated 13 years of contribution from Kent Christensen and wish him well in the future," said Kirk. "The promotion of Scott Stubbs to CFO is a great example of the depth of leadership at Extra Space Storage, enabling a smooth transition of roles within the company."

Headquartered in Salt Lake City, Extra Space owns or operates 860 self-storage facilities in 34 states and Washington, D.C. The company's properties comprise approximately 570,000 units and more than 62 million square feet of rentable storage space.