Opinions expressed by Entrepreneur contributors are their own.
The growth of vertical housing and the increasingly reduced living spaces in large metropolises represent an opportunity to undertake the business of self-storage or self-storage , where the rental of mini-warehouses of 1.5 to 30 square meters has become the jewel of the crown.
The business emerged in the United States in the late 1950s, but it was in the mid-2000s that it formally arrived in Mexico to solve storage needs for individuals, companies, and small businesses.
Currently, the national self storage industry is rapidly growing. According to the Mexican Self- Storage Association (AMDAAC) it has almost 200 establishments. Of these, just over 25% are located in Mexico City and its metropolitan area.
The real estate brokerage firm Newmark Knight Frank (NKF) warns that these premises cover around 500,000 square meters of Gross Profitable Area (GLA) and at the end of this year could add 20%.
Is there room for more bidders? The answer is yes, mainly in cities with a high population density such as Mexico, Guadalajara and Monterrey , mainly.
If you want to participate in this young industry – which is expected to grow from 15% to 20% by the end of 2019 – follow the advice of the experts.
The self storage business has two types of consumer: residential –which represents 70% of the customer base– and commercial / corporate –which contributes the other 30% -. The first keeps personal items, and the second documents, small equipment and merchandise, for which they are willing to pay rents ranging from 400 pesos for 1.5 m2 of warehouse, up to 10,000 for 30 m2.
“It is a very powerful industry, especially in the United States, where in 2003-2004 there were 45,000 branches, more than 150 million profitable meters and one out of every 11 families used the service. In Mexico, our estimates indicate that one out of every 360 families uses it, which speaks of the opportunity and but also of the underpenetration ”, explains Diego de Yzita, general director of U-Storage Mexico .
These users generally do not exceed 45 years, with a significant peak of millennials, which is explained by their low dependence or attachment to things, their high mobility index and, in many cases, the impossibility of paying for housing with space for save.
Regardless of the type of consumer, what everyone looks for in self storage is location, practicality, security, cleanliness and accessibility. Do you meet the profile?
The self storage business solves a fundamental problem: the lack of space to store everything that does not fit at home, the business or the office.
This phenomenon is increasing due to the fact that in Mexico one out of every two new homes has less than 60 square meters of habitable space, according to that of the Unique Housing Registry (RUV), and that the cost of ownership / rent has become unattainable for many entrepreneurs and businessmen.
Faced with this scenario, the self storage industry offers the possibility of storing objects and merchandise with security conditions, cleaning service and accessibility 365 days a year.
“There are many factors that drive business growth. For example, the attachment that most Mexicans have towards their things, increased mobility for studies or work, increased consumption and the rise of entrepreneurs who want to store merchandise “, explains Eduardo Alazraki, a businessman who after dedicating himself to the advertising and restaurants is about to enter the self storage business with a complex that will soon open in the west of the city.
If, like Eduardo, you want to start the storage business, study the market and make a business plan. Remember that there are various public and private entities that offer consulting in this regard.
In a service such as self storage , the value proposition is delivered to the client in a physical space (on site), where the user accesses the type of warehouse that meets their storage needs in a 24/7 scheme.
The reservation of the minibodega can be done online, but it is necessary for the client to sign a contract and deliver certain documents depending on whether he is a natural or legal person.
How is the service promoted? Basically through the Internet and social channels, although there are also companies that use sales agents.
Apart from the above, it is necessary for the client to have certainty about the quality and scope of the service they will receive, for which it is essential to have a contract that details early departure clauses, prohibited objects, schedules, insurance coverage (if that is the case). there is) and staff assistance, among other aspects.
Relationship with customers
In a mini-warehouse space, the relationship with customers is given 1: 1, through the telephone or through digital channels such as email, chats, social networks or WhatsApp.
“We are in 2019 and social networks and the Internet are preponderant to publicize your services and get closer to your potential clients. Obviously there are other media as well, such as print and even flyers. The idea is to reach all those who need it ”, explains Eduardo Alazraki.
In this sense, you can start a marketing plan on social channels (Facebook, LinkedIn, Instagram and Twitter). At the same time, you can carry out an emailing campaign and if your budget allows it, run a Public Relations strategy that includes media positioning and relationships with opinion leaders in the areas of business, logistics and entrepreneurship.
Finally, remember that you must create an attractive website that includes a blog with information of interest to the client, a frequently asked questions section and a chat to facilitate the contracting of the service. It also includes an area for electronic billing and a Privacy Notice.
Source of income
70% of the income in this line of business – which maintains an occupancy rate of between 80% to 90% for most of the year – comes from residential customers. The remainder comes from business users and from the sale of boxes, locks and packaging material. Some companies also offer moving services, which represents another entry.
Multibodegas, for example, is one of the largest suppliers in the national market with 20 branches in Mexico City and its Metropolitan Area, Puebla and Cancun. It has 75 employees and around 5,000 mini-warehouses that correspond to a profitable surface of 50,000 m2 of warehouses ranging from 1.5 to 30 m2 in a total of eight sizes.
“The price range oscillates between 400 and 10,000 pesos per month. Our differentiator is that we have a moving service with vans with a capacity of 1.5, 3.5 and 7 tons, and Rabones trucks of 10 tons. All with aluminum dry boxes and in optimal operating conditions, in addition to all being equipped with GPS devices for point-by-point tracking and control of opening doors via satellite ”, says Alejandro Cabrera, general manager of that brand of mini-warehouses and current vice president of the AMDAAC.
Do you want to generate more income? Add the packing service and the loading and unloading service. For this, you must have extra staff to offer the service. You can also provide advice for the use of spaces.
“The rental of mini warehouses is tax deductible and the collection generally from domicile, which makes things easier,” added Cabrera.
If you are interested in the turn, remember that the key to success is in good administration and excellent service. If you add this to a good location and marketing plan, it is likely to be easier to achieve between the 50% and 70% profit that the industry promises. Seek consulting!
The base area for the rental of mini warehouses can be 500 m 2 , but it can reach 1,000 m 2 or more depending on your project and budget, and the land or premises / Image: Shutterstock
To open the curtain of a self storage, the first step is to choose a location that guarantees a high demographic concentration and that is connected through various communication channels.
The base area can be 500 m2, but it can reach 1,000 m2 or more depending on your project, budget and, of course, the terrain or premises.
U-Storage, for example, develops mini-warehouses from scratch in its own spaces, which allows it to take advantage of every corner of the land in question. By 2020, it seeks to develop 14 more units based on the goals that were proposed in 2018, when it created the first Fibra Storage, a Real Estate Investment Trust (Fibra) specialized in mini-warehouses.
“There are many ways to participate in a development with U-Storage. Entrepreneurs can do it through the Mexican Stock Exchange or if they have some land available they can also look for us. ”, Adds Diego, whose brand has 28 complexes and 14,000 mini-warehouses in a profitable area of 125,000 m2.
Apart from this proposal, there are those who undertake in rented spaces. If this is your option, you can subdivide a still life or rent an open space and adapt it to your project.
To do this, you can look for construction techniques and materials such as those offered by Corporativo AEPA, a company specialized in the development of mini-warehouses, whose removable structures mitigate losses due to possible changes of headquarters.
“For example, a space of 500 m2 we enable it in about a month building warehouses of 1.5 to 20 m2, on average. The construction time and the cost may vary if the mini-warehouses are roofed or double-height ”, explains Abel Pérez, managing partner of that development company.
Resolved the issue, focus on human resources; hires a general manager, an administrative officer, a salesperson, two surveillance people, two cleaning people and an accountant via outsourcing. Remember that staff can vary according to the size of the complex.
Finally, do not forget the ‘paperwork’, which you must start along with the last touches to your business model. What should you have on the radar? Trademark registration, company constitution, and legal (contracts, permits and insurance).
The mini-warehouses are open all year round; some operate 24 hours a day, while others have restricted hours at night.
Four key activities are carried out each day: administration, sales, cleaning and surveillance. In this last category, most of the establishments rely on closed circuits, alarms connected to Public Safety and 24-hour on-site surveillance.
“We keep a strict control of what enters and leaves our warehouses and what leaves our warehouses. There can be no moisture, dirt or anything that can affect what we keep. We spray once a month. We have lighting in all the wineries and the possibility of contracting an optional insurance ”, says Judith Guerra, general director of EnbodagaT.
Edgar González, manager of that brand that has 2,800 m2 of profitable space, adds that it is forbidden to store perishables, live or dead animals, gas tanks and chemical products, among others.
As you can see, there are many processes that must be taken care of in the business, but security is one of the most important.
In a self storage business you can make alliances with moving companies, corporations, marketplaces, housing complexes, small companies, among others. The idea is to offer your services at a preferential price in exchange for influx or any service you need.
The investment in a mini-warehouse business depends on the size of the premises, the number of warehouses to be built, as well as the equipment and the adequacy of the common spaces, such as corridors, loading and unloading area, toilets, parking and general warehouse.
The rent varies according to the area. Thus, while in the Cuauhtémoc neighborhood the m2 oscillates between 250 and 280 pesos; in Polanco the price shoots up to 500 or 600 pesos for the same area.
“We, for example, do not buy the property; we are tenants and subtenants. It is a solvent business, but not enough to buy a property from scratch, “warned Judith Guerra, CEO of EnbodagaT, which currently has three complexes in Mexico City.
What about the cost of building the mini-warehouses? It is around 300 pesos per m2 of facade and 500 per m2 of roof. To this must be added the authorization of common areas and working capital for six months.
“The reality is that in a year you must recoup your investment in construction as long as you have 80% of your installed base rented; It is the formula that the market follows. It is a very economical, ecologically friendly and very profitable business ”, adds Abel Pérez, from Corporativo AEPA.
Obviously, there are other business models. Franchises is one of them. In this area, the brand from Guadalajara You Save Bodegas is a benchmark in the middle since it is 24 years old, and has 21 branches in the franchise format, which total 8,650 mini-warehouses in 90,100 m2.
To invest in this concept, the investment ranges between 2.5 and 30 million pesos, to which must be added the cost of the land.
Lastly, check how much to pay your employees. A general manager receives around 16,000 pesos per month, 8,000 the administrative one, 8,000 plus commissions the seller, 7,000 the guards, 4,500 the cleaning staff and 6,000 the accountant (can be hired via outsourcing).
If you have questions about how to make spending more efficient, review your business plan and seek advice.
“We have loyalty programs and we offer discounts. For example, if you pay six months in advance and we charge you 5.5 months; If you rent for a year, you pay 11 months ”, adds Judith Guerra, CEO of EnbodegaT .
Now that you know how to undertake this turn, make your business idea come true. Seek financing, technical support, and consulting.