Land in smaller towns or secondary markets is typically more affordable than in primary urban centers. This cost advantage provides a solid foundation for profitable self-storage facility development. Land in a top-tier metro may cost millions per acre, whereas in secondary markets, several acres might be $100k to $500k. This leads to a reduced total cost for the project, less risk, and higher returns.
High-density metros do not necessarily have higher rents - so the higher land cost is not always justified. Patriot selects secondary markets that have strong rents, further enhancing profitability and returns.
Barriers to Entry
While land might be cheaper, securing approvals for development in these markets can be as challenging as in primary markets. This creates a natural barrier to entry, reducing the risk of market saturation and ensuring that established players can maintain a competitive edge.
Dominance in Local Markets
In many secondary and tertiary markets, there might only be one or two self-storage facilities within a significant radius. This limited competition allows Patriot to effectively control the local storage market, granting us the leverage to optimize pricing and boost revenues over time.
Value-Add Opportunities
Facilities in these markets often lack the sophisticated management seen in top-tier markets. This presents a golden opportunity for investors to implement operational improvements, unlocking significant value and enhancing returns. Over 80% of self storage facilities nationwide are owned by “mom and pop” operators - with the majority of these in smaller markets.
Reduced Competition and Savvy Marketing
The competitive landscape in secondary and tertiary markets differs vastly from urban centers. Many local competitors might lack a robust online presence, with missing websites, unoptimized Google My Business pages, or even slow response times to customer inquiries. This provides a distinct advantage to Patriot and our All Purpose Storage brand - as we are aggressive with our online marketing, allowing us to capture a larger market share.
The Remote Leasing Revolution
Remote leasing has been a game-changer for self-storage investments in secondary and tertiary markets.
Reduced Overheads
By eliminating the need for an on-site manager, the overhead costs associated with running a facility drop significantly. This lean operational model directly translates to increased profitability.
Efficient Leasing Mechanisms
With the ability to lease units online and through call centers, Patriot can tap into a broader customer base and provide better customer service as our team is in-house. This remote model ensures that units are leased efficiently, maximizing occupancy rates.
Demographic Shifts and Market Dynamics
The recent trend of remote work, catalyzed further by the COVID-19 pandemic, have seen a demographic shift, with more people moving to smaller towns. This migration has led to a population boost. Secondary and tertiary markets are experiencing a surge in their populations, leading to increased demand for various services, including self-storage.
Many of these markets are under-served, with available storage space well below the national average of 8 sqft per capita. This gap between supply and demand presents a lucrative opportunity for self-storage facility investors.
Conclusion
Secondary and tertiary markets, often overlooked in the past, are now emerging as goldmines for self-storage investments. The combination of modern remote leasing models, demographic shifts, and the inherent characteristics of these markets presents a compelling case for investment. Patriot, and our All Purpose Storage portfolio focuses on these unique markets, and we leverage our remote leasing model to maximize returns.
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