Self-Storage In Canada:
Evaluating The Industry of America's Northern Neighbor
By Betty L. Johnson
Barry Ghiglione of Saskatoon, Saskatchewan, is about to break ground
on his first self-storage facility. He has been involved in the
equipment rental business for some time, and he thinks the time is
right to capture his share of the self-storage market. Ghiglione is
not alone. In fact, the self-storage industry in Canada has been
making great strides both in numbers and sophistication over the
past five years. Facilities with multiple stories, climate control
and individual security alarms are springing up, while new marketing
schemes are being dabbled with.
Culturally Diverse Customers
Canada, much like its southern neighbor, is a culturally diverse
nation. The country saw a great deal of immigration directly before
the transfer of power in Hong Kong, for instance, and many new Asian
communities were created. For the most part, the Asian community is
a tough shell to break in the storage market. Culture dictates that
most families are frugal, keeping only those items that are useful
in their daily lives. When the dust settled however, many of Asian
families took on a dual-continent lifestyle and began to store their
belongings in Canada when they returned to the east.
The province of Quebec is unique culturally, as the official
language is French. This built-in language barrier seems to have
limited the expansion of the many American companies in the
province, and helped individuals, whose pockets may not be so deep,
to compete. “These companies had no French-speaking managers,” says
Turan Kalfa, president and CEO of National PSI, Inc., based in
Montreal, Quebec. Although U-Haul and Public Storage have a presence
in the city, Kalfa says, “They haven’t built a new location in the
last six years, whereas I have seven locations, and I try to build a
new one every year.”
The city of Montreal, Kalfa notes, also made headlines this year
when it absorbed 28 different surrounding cities as of January 1,
2002. Kalfa’s original city of St. Laurent was one of the towns
included in this expansion. “I no longer need to get 28 different
permits if I want to build. I can now deal with only one city.”
While they may be diverse in culture, Canadians are also highly
educated, says Ken Waddell, owner of Space Place Self Storage and
Centre Avenue Self Storage in British Columbia. “We have a lot of
academics, and when [people] call, their questions are good ones.”
Therefore, training your sales staff to have the right answer is of
utmost importance.
Limiting Factors
As the Canadian economy has grown and new businesses have sprung up
in both large and small towns, the land to build on has increased in
value. While this gives a slight advantage to existing facilities,
it can make expanding more difficult.
In addition to the land expense, the cost of construction is
increasing, and according to KC Moriarity, owner of Space Place NW
Storage of Alberta, Calgary, “It is hard to find skilled trades
people to construct for you.” Additionally, all the doors and many
other integral parts of the facility must be imported from the U.S.,
where the current exchange rate works against Canadian companies.
“It is harder to be successful in Canada because we have a lot of
limiting factors,” says Moriarity. “The political process is
lengthy. Self-storage, while becoming more high profile, is still
relatively new in some areas. Finding a good location and getting
building and development permits is very time consuming. There are
also less financial institutions to provide funding for large
projects. We have perhaps five major banks in Canada, where there
are thousands in the U.S.” It is because of these factors that
Moriarity believes that much of the new development in Calgary is
being done by companies who have been in the self-storage business
in the past.
Waddell affirms that the days of quick, inexpensive start-ups may be
fading in Canada. “It seems like tightening up our building
regulations is an annual event,” he says. “Higher fire separators
between occupants are now required, sprinklers are mandatory, and
non-combustible construction materials are being mandated.”
John Madsen, owner of North Van-couver U-Lok in Vancouver, British
Columbia, points out that Vancouver, and in fact, all of British
Columbia, is currently on the mend after 10 years of a stagnating
economy. “Of the 87 members of the Legislative Assembly, 85 are now
more business oriented,” he says. “We are definitely a
business-friendly environment now.”
There are still some difficulties with Canadian law and
self-storage, however. Ontario self storage operators, for instance,
are still working out their concerns with new tax legislation that,
although written to be tax neutral, adversely affected self-storage
operators. “Only 17 percent of our population knows what self
storage is,” says Kalfa, who explains that it is difficult to get
permits because there is no translation for “self-storage” in
French. Therefore, in French speaking Quebec, getting a permit for
self-storage places you in the same category as chemical storage.
“When I go for a permit, I must constantly educate people as what
self storage is, what is being stored and who is storing it,” Kalfa
explains.
Down to Business
Waddell, who operates one facility in the U.S. and three in Canada,
reports that some business matters, such as just collecting the
rent, have variations in the land of the maple leaf. A bounced check
in not considered a criminal matter in Canada, so companies are
provided only civil avenues to pursue satisfaction on a check
returned for non-sufficient funds.
“Collections are to some degree more difficult here,” says Waddell.
“We seem to have a higher ratio of outstanding debt. In the end, our
actual write-offs are about the same, however, standing at about
three to four percent at both places.” Additionally, it takes more
than 60 days before goods can be auctioned, and the company is
required by law to advertise for two consecutive weekends in a local
newspaper prior to the auction.
Peak periods in Quebec are not only influenced by the weather, but
also by a law that provides for all leases to come due on the first
of July. This practice ensures that the summer months will have the
highest occupancy rates, as people try to make their moves near the
expiration of their leases.
Marketing Models
As the big name operators like Public Storage, U-Haul and Sentinal
take hold in Canada, marketing becomes more important to independent
operators. Susan King of Winnipeg, Manitoba, acknowledges the
presence of some of these companies in her area, and realizes there
may be “some change in the market.” However, she believes that her
business, built on her personal service, will continue to gain
customers thanks to referrals from satisfied customers.
Indeed, referrals are cited as a huge source of self-storage
customers across Canada. Most marketing efforts are based on Yellow
Pages and a few newspaper advertisements, with most new complexes
using the storage facility itself to advertise by leaving lights on
to highlight the roll up doors at night and painting the name of the
facility in large letters on the building.
Joe Kormos, president of the Ontario Self Storage Association and
owner of Canadian Storage Centres, Inc., based in Toronto, Ontario,
says he has experimented by bringing in an experienced telemarketer.
Kormos says that he was pleased to achieve a 10 percent success rate
from those telemarketing efforts. He also created “Storage
Locators”, which is a referral agency that first refers to his own
self-storage sites, and then, when he cannot satisfy a customer’s
needs, to other facilities.
Kormos has been on the leading edge of another self-storage
phenomenon in his country. In 1981, concerned with customer
complaints about the monthly lease length and the loss of goodwill
this cost the company, Kormos began offering weekly rental rates
that are paid every four weeks. This provided flexibility to the
tenant for move outs, consequently increasing his word-of-mouth
business. It also had the added benefit of allowing him to rent the
unit immediately upon a move out.
Additionally, Kormos’ new rental concept added to the worth of the
property, since the value is based on annual rentals that can be
collected. While monthly leases provide 12 payments per unit
annually, the weekly lease, collected on a four-week basis, provides
for 13 payments per unit each year. “Virtu-ally every new project is
now following our lead and offering a weekly rental contract,” says
Kormos. There were challenges involved in pioneering a new system,
including developing the software to do the billing, but the effort
is paying off handsomely.
Looking Ahead
So what are the prospects for self-storage in Canada? Look no
further than the United States. Canadians are incorporating U.S.
resources such as associations, training and equipment into their
self-storage businesses. “We make small adjustments to take issues
from the U.S. and implement them here,” says Yvonne Davalone, owner
of Downtown U-Lok Storage Ltd. in Vancouver. “We might as well be
one country as far as self- storage is concerned.”
Betty L. Johnson is an editor and freelance writer based in Las Vegas,
Nevada.
This article is provided courtesy
of Tech-Fast Metal Systems
with the permission of
Mini-Storage Messenger
magazine. © MiniCo, Inc. All Rights Reserved. It is not
intended for further reproduction/distribution without the exclusive
permission of MiniCo, Inc.
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