Centershift Keeps the Storage Industry Running Smoothly
- Apr 23, 2014
Salt Lake City—Like multifamily real estate, the storage industry has made a strong post-recession recovery. The renting of convenient space for storing extra personal possessions attracts both mom-and-pop proprietors and the investment dollars of large, publicly traded REITs.
Centershift, a Salt Lake City-based company, created a scalable, flexible management system for storage 15 years ago. Recently acquired by Yardi, Centershift’s two product offerings are powerful, cloud-based solutions for running and reporting on storage properties. The company was an early developer of an effective revenue management system for the industry, and truly understands this unique property niche.
Recently, we spoke with James Hafen, Centershift’s CEO prior to the acquisition. He’s now a general manager and industry principal, self storage, for Yardi Systems. Read on for his insight on the storage industry, Centershift’s products, and what the acquisition means for the company’s future.
Tell us about the originations and history of Centershift?
Hafen: Centershift grew into a standalone company after developing a management application for the use of Extra Space Storage, which is now the second largest company in the storage industry. Around 1999, Extra Space was focused on substantially growing their business and struggling with technology, which was underserving the industry.
We looked around, trying to find software solutions that would work, and there was just nothing that would fit. We needed something that was cloud based, would allow for centralized data management, and solve a lot of the problems that Extra Space was having. We built the first version of the Centershift product in 1999 and rolled it out in 2000 as an internal IT project. We had enough success that we saw the value in this as a commercial opportunity. We continued to develop the product while we came up with a business strategy and became an independent commercial venture in 2002.
MHN: Where do the storage and multifamily markets intersect?
Hafen: We know that the life events that cause people to need storage are obvious things: divorce, a death in the family, or a move. If we have insight into when people are moving, we can provide intersective market analysis that will become leads for storage space marketing. Whether the need for storage is short term or permanent, we can capitalize on the fact that moves drive storage. Additionally, knowing that people are moving into storage may provide leads for apartment operators.
MHN: What are some characteristics of the storage industry as an investment product?
Hafen: Self-storage has long been known as a very resilient product type. Investors love publicly traded self- storage stock because it weathers very well through things like the recession of 2008-2009. As the recession started, the market was becoming overcrowded with new properties, which were being built up through 2008. The recession slowed down that growth. Investment and expansion disappeared for a while, but now both have come back.
There are between 40,000 and 50,000 storage facilities in the USA, and about 25 percent are operated by REITs and large private management companies. The remaining 75 percent of the markets space is owners who hold one or several properties.
MHN: What has the post-recession period looked like for the storage industry?
Hafen: Occupancy is high, rents are high, the money’s coming back and people are looking to build. There are a number of large companies that we’re aware of that are moving back into the space and trying to capitalize on the fact that self-storage survived the recession, rebounded faster than most other segments and is a really profitable space.
MHN: What issues has Centershift helped resolve for storage providers?
Hafen: We’ve always been a more attractive option for the larger operators, with lots of properties and the need to manage them centrally. The paradigm when we entered this space was stand-alone databases on desktops. If you wanted to get consolidated reports and close your books, and you had 10 properties spread across a couple of states, you were faxing data around and re-entering data. The immediate plea was “Help us manage a portfolio of multiple properties,” and we made that much easier.
Pain points now are competing with the aggregators on Internet listing sites, which are poaching a lot of revenue from our customers when they compete for leads in the industry. It isn’t something we can solve today, but it is something that we want to solve. The hope is to be able to combat that situation with a comprehensive solution that we can provide given our industry knowledge, Yardi’s technology and what we want to build in the ILS space.
MHN: You applied that industry knowledge to a revenue management solution for storage. Tell us about that.
Hafen: We developed an industry-leading way of looking at occupancy, demand and forecast and setting up rules to manage rent rates, so that you’re not leaving money on the table. You should not be giving away promotions when you’re at 99 percent occupancy on your 10x10s. At the same time, you should be lowering rates, driving traffic to other unit types that aren’t renting well.
Our market studies showed that the impact of this product was significant, producing an average 8-9 percent increase in ROI, just by implementing very simple rules to manage your rates. We still have the most sophisticated tools in the space for doing that.
MHN: Tell us about your two Centershift products?
Hafen: We are the most advanced tech company in the storage space. When we first began building our product for Extra Space, we were bringing in web-based applications, with data stored in the cloud. The technology wasn’t novel, but the application to self-storage certainly was.
We have a single product line with a single code base, but certain bells and whistles are turned off at the Advantage level for our smaller operators, who may not need as many features. With our Enterprise product, you harness the full power of what our product can do, with additional features and functionality.
That includes tracking of customer activities that are very similar to multifamily: moving people in and out, managing reservations, payments, communication and delinquencies. There’s our revenue management tool, which I described. We can also handle bulk mail processing, insurance for unit contents, credit card processing, and we offer a retail module to sell moving supplies and locks for your unit.
Clients have also used our service-oriented architecture to extend the functionality of what we provide in our application to their own specific uses and business systems