On Tuesday, September 18, 2012, Extra Space Storage CEO Spencer Kirk was interviewed by TheStreet.com. The company stock has recently shown significant growth in value.
Three Reasons Cited
When asked why shares of Extra Space (NYSE: EXR) have risen by 40% in 2012, Kirk attributed the stock price increase to three factors. Kirk said self storage has weathered the recession well. Self storage rental space is a demand based product that does well in good economies as well as bad. Whatever the state of the economy may be at any given time, life events including birth, death, moving, marriage, divorce, and attending college all are among many factors which drive demand for self storage, Kirk shared. These activities tend to remain fairly stable in good and bad economies.
New Construction Has Stalled
Second, the supply of new storage units for rent has remained stagnant since the end of a self storage construction boom which concluded in 2007. Since then, new self storage construction has stalled and virtually none was built in 2012, Kirk related.
Larger Players Adapt More Quickly
Third, Kirk said the internet, once thought to be the great equalizer among self storage competitors, has in reality become the great divider as the ability to quickly adapt to rapid changes in paid internet search and search engine optimization has swung to the larger players in the market.
Kirk went on to explain Extra Space differentiates itself from other large players in the self storage market by having the largest percentage of properties in the top 20 metropolitan markets, as well as focusing on giving self storage shoppers a unique internet experience with Extra Space compared to their larger competitors.
Striving For An Engaging Online Experience
It is this competency in attracting and then engaging self storage customers on the internet combined with projected flat growth in new self storage unit construction which has Extra Space well positioned to continue its stellar performance into 2013 and beyond, Kirk said.
Kirk also emphasized that 90% of the self storage businesses in the United States are still mom and pop operations. As these smaller operations seek to sell, Extra Space will continue to buy them, even though prices for existing enterprises are rising due to a combination of demand and lack of new storage business construction.
Storage Auction Popularity is Bittersweet For Operators
Kirk confided the popularity of television shows featuring auctions of abandoned property from self storage units has driven attendance at these auctions. More bidders mean in higher prices and thus profits from these sales, but companies like Extra Space view this as an unfortunate part of their business.
The big picture, Kirk said, is these auctions mean a former customer is losing their assets and their possessions which they had stored away. Like a divorce, it’s something neither party wanted as an end result of the relationship.