From 1 store to over 100: Adrian Lee, Big Yellow

You'd love a store at 100%, but actually what you really want is a store at sort of 85% to 90% with a regular churn of customers, giving you an opportunity to sell to new customers, bring new customers in at higher prices, remove customers at lower prices, and be putting through your price increase process. So yeah, those are your probably your 3 stages, your initial fill-up, then your sort of mid-stage 50% to 80%, and then the sort of micromanaging when you get to maturity.

Welcome back to Scaling Self Storage. Thanks for joining us today. I am joined by Adrian Lee, former Operations Director at Big Yellow Self Storage. Adrian, thank you very much for joining us.

Pleasure.

We're going to just dive straight in. Tell us a little bit about yourself and how you got into self storage.

Okay. So I started in investment banking in a real estate team at a merchant bank called Lazard's, and we advised various real estate businesses. And one of those businesses we advised, I then went and joined, and it was a retail warehouse developer. And there I joined Nick Vetch and Phil Burks and Jimmy Gibson, and the 4 of us started Edge Properties. We had, we ran that business for 3 or 4 years and then sold that. But just prior to selling it, we were investigating other things that we could diversify into from the retail warehousing that we were doing. And we had seen self-storage in America, and we were starting to look at self-storage in the UK. And then a bid came in for our business and we decided to sell it. in 1998. And so we started Big Yellow after the sale of that business. And that's how Big Yellow started. It was a sort of crazy little idea. We thought we'd try something different. Nobody else was really doing self-storage at that time. And we were investigating a new real estate business.

So by 1999, there were 4 of you, 1 store in Richmond.

Yep.

At the time, were you thinking about what you were going to build? Or what did you think you were building at that time, at the very start?

I'd love to say we had the vision to see where Big Yellow has been today. But of course, we didn't know. We were looking at a sort of 5-year horizon at putting together a business that probably had 5 or 6 assets and selling those assets on to other investors at some point in the future. So that was our mindset at the start, was it was an interesting area of real estate. None of us knew anything about self-storage. The UK didn't know very much about self-storage, so we had not much idea about how big a business it might potentially have become. But we just thought it was an interesting operational real estate investment area. And so we would give it a shot for 4 or 5 years and see where it went. So that was the concept at the start.

Do you remember the origin story for the name Big Yellow?

Yeah, well, we'd love to say that we invented it, but we didn't. We bought— the first thing we did was buy a site in Richmond, and the second thing we did was buy the existing big yellow self-storage, which was up at Staples Corner.

Ah, okay.

And that had been built, opened, we think, by an operator who had been in America, came to the UK. It was a brand he nicked from America, we presume. It doesn't exist in America. It disappeared inside some other business, we presume. But yes, he opened a big yellow self-storage in Staples Corner. And having bought our plot of land at Richmond, The first thing we did was buy the asset in Staples Corner as well.

So the one that you bought in Staples Corner was the first operating site you had?

Exactly.

While you had a site in Richmond? Exactly.

So from our point of view, we had a piece of land, we quickly bought another site at Croydon. So we had Richmond and Croydon and an operating business in Staples Corner to tell us how to run it. That's what we needed to know is, well, how do you run self-storage?

So what was your second site then? What was the second site that opened?

Richmond and then Croydon.

Yeah. Okay.

But so Staples Corner was effectively an existing operator. I mean, Staples Corner is now, Big Yellow still is trading at Staples Corner, and in fact, just opened its brand new Staples Corner last month. And that is actually the 3rd building at Staples Corner, because we opened, we had the original store, we then took a lease at the other end of the estate, shut down the original store, opened a much bigger store, and have now converted that, bought another neighbouring freehold site, opened that freehold store, and converted all the customers from the leasehold store into the freehold store this year. At the moment, it's underway as we speak.

So, moving customers from one building to the other, existing customers?

Yes.

Have you done that much over the years?

4 or 5 times.

Was that usually a process?

Yeah. Well, usually, it was a consequence of having an asset in a leasehold building and moving it to a freehold building. So, that would be the business rationale behind it. It's not an economic thing to do very regularly. In the case of the original store at Staples Corner, it was a very historic store. It had opened in the 1980s. Famously, it was blown up by the IRA. The IRA put a bomb underneath the North Circular and Staples Corner was standing right next to it. The bomb— there's so much concrete in the elevated section of the North Circular that the blast went out sideways and demolished the building next to the motorway, which happened to be the building that Big Yellow was in. So they started it in the very early '80s. I think it was destroyed in the mid-'80s. '80s, they reopened it again. And so we took that on in the late '90s. So it was at that point 10, 12 years old, but it was very basic. You know, the sort of finish that you associate today with traditional self-storage, the white tin, the bright doors, the neon, the LED lighting, none of that was there. We were talking blockwork, we're talking corrugated steel. I mean, it was really basic finish inside the building.

And so that was 1999. At that time in the UK, what was the self-storage landscape like? Were there many operators? Was it a handful?

So there were a couple of larger, well, a couple of operators that had started. SureGuard had just come to the UK through its American operation coming over to open in the UK. So they'd opened one, possibly two stores by the time we opened. Access's pre-runner. So there was Abacus Storage and Acorn Storage was merged into Access by some American private equity at that time. So they had just come into the market. They were probably the biggest operator. And there were a couple of independent operators. But the landscape was obviously very different from today. But there was investment in self-storage. It is not as if we did not invent the product. We simply had seen people in America doing it in a slightly different way. Typically in the UK, Almost every single self-storage operation was inside an existing building that was converted into self-storage. So the building was at the end of its life as a warehouse, end of its life as an office building, and was being converted into self-storage. And that was the typical route to opening a self-storage, is finding a cheap derelict building and converting it into self-storage. To be fair, Shorguard were looking at new build, and that's where our desire was to get into new build.

Mm-hmm.

Our first stores at Richmond and Croydon were refurbishments of existing buildings, but very quickly, our 4th or 5th store was at Romford, and that was the first new-build store that we put in place. And very quickly after that, everything we were operating from was a purpose-built new-build store that we were constructing.

Because you did, so fast forward, and you went to over 100 stores, but it wasn't like you had a free run at it from '99 onwards. You always had competitors.

Sure.

Looking back and thinking about what was it that differentiated your approach versus competitors? What do you think it was? Maybe when you talk about the new stores, it could be something about that. I'm just interested, what did Big Yellow do differently, do you think, that led to your success?

I think the first thing that we identified was that we wanted to create a brand. And at that point, whether it was Acorn or Abacus or A1 or A to Z, or you'll notice there's a familiarity here, They were all basically homogeneous brands. They were all— there was nothing that stood out. And so what we wanted to do was create a brand and put our buildings in a much more prominent location. So I think the first part of the business was really about real estate and buying location and putting impressive buildings in that location. So creating a brand through the physical presence of the building. And then that sort of then morphed into a different strategy in terms of taking that brand and driving it forwards, creating the best customer service, creating an experience that, you know, was sort of going to be level with or commensurate with the sort of charges that we wanted to put into the building and to drive through the operation. So we wanted to, you know, go from just creating good buildings to creating a fantastic service as well. So I think we probably led in terms of visibility, in terms of brand presence, and in terms of customer service. And those were the core things at the start for us was, how would we like to be treated if we were a customer? How can we really maximize the experience for our customers in providing the service?

And in terms of maximizing the experience for the customer, there's maybe a different answer today than what it maybe was in 1999. But when you think about today, what are the areas that you What are the areas that an operator, to maximize the customer experience, where do you think people should be focusing?

Yes. So things have—

Where did you focus a bit?

Yeah, I think things have obviously changed. I mean, for us, that became the quality of the asset, but the quality of the experience with the team as well. So we spent a lot of time training, developing, working on operational systems, trying to make the process as slick as possible, as customer-friendly as possible, making the experience as easy as possible. So whatever ancillary services that were needed to help that experience, whether you're working with a removals partner, you're working with a sort of business service operation, whatever. However, whichever customer that you had, how do you make that experience as simple as possible for them to come and use self-storage? So that was what was sort of driving a lot of what we were carrying out at the start. And that has then morphed. I mean, you know, as costs have changed, As demand from the customers have changed and as technology has changed. So those things have all evolved over time. And what Big Yellow is focusing on today is not wholly different, but Big Yellow's sort of focus today would be— have evolved quite a bit over that 20-year period.

Yeah. In the time you went from 1 store to over 100 stores, were there points where the job you were doing at the start changed? I imagine, you know, as things grow, that the job becomes a different job.

Yeah.

Do you remember those phases of change over the years?

Yeah. So, I think probably initially, whilst the 4 of us were driving the business, there was— and we were very actively involved in the detail— there was the initial setup phase, the assembly of 5, 10 locations, the opening of the first 4, 8 stores, you could cope at that point with the sort of the routines that you were going through from the management team that we've created. The next stage really was bringing in this sort of layer of management beneath us who would start driving the business forward. And we had always— you asked me at the start what our vision was. Our vision was relatively short-term, but it was always a rolling 3 to 5 year plan.

Yeah.

So we wanted to create a business then that would allow us to manage 50 stores, stores, 80 stores. So you bring in place the sort of the key management layers that allow you to do it. And that was the first big change because from our point of view, we were kind of professionalising the management team inside Big Yellow because we'd had no experience running a service business before. We were real estate guys. We knew finance, we knew real estate, we could do site acquisition and development. But in terms of marketing, in terms of operations, in terms of facilities, in terms of sales, these are all areas that we were learning as we accumulated the portfolio. So you start bringing in the professional layer below that, and that really sort of changes the character of your business.

Yeah.

And then it just continues to evolve from there. And once you've got the key senior management team in place, and we were very lucky, the initial recruits that we undertook in some of those key management places stayed with us for 15, 20, 25 years. Some of them are still in place today from the original management, from the original recruitment of the management team that we put in place. But they are the sort of foundation that allows you then to expand to the next level. And kind of, you know, at that point, it's a sort of living, growing beast. And of course, it requires fine-tuning. But yeah, putting in place the sort of key management positions below you is the sort of big cultural change in that business.

Yeah.

And then ensuring that you still have that culture, because a lot of the— I remember the discussions at the time, a lot of the original teams that you recruited? Oh, I said, oh, we always used to be able to talk directly to you. Now we have to talk through X or through Y. So it's how you maintain that small company culture within a bigger corporation.

Yeah.

It's always something that we strive to try and maintain. So we had a lot of regular access from the chief executive, operations director, finance director with the stores. So they never felt that it was always— they could never be in touch with the directors of the business. We always brought the directors to the business to try and create that feeling as well.

In your experience over your time at Big Yellow then, what sort of a person turns out to be great at running a self-storage site?

So you could sort of characterise the key people that we tend to bring into self-storage, into salespeople and operating people. And self-storage is a curious mix of every week, 20, 30 move-ins and 400, 500 customers that you're administrating and billing. And we— you kind of feel that you need either one or the other, but actually, we settled on a a hybrid role in that you tried to recruit people who were good at both things. Because if you find someone who's excellent at sales, then typically they're rubbish at customer management. And if you find someone who's brilliant at customer management, they don't tend to be very good at sales. So if you sort of focused on one or the other, you were always creating a headache for yourself inside a small team of 3 people who were running a store. And you were better off finding people who were general between both.

Mm-hmm.

And We always recruited out of hospitality, pubs and hotels and restaurants. And we recruited out of, yeah, well, hotels was sort of a pretty common area. But people with public-facing experience would tend to be, you know, the stronger candidates. But we put in place quite a lot of development. We put in place a lot of development to improve the performance of the people that we brought into the business because— It is quite unique, self-storage. It's not difficult to run a self-storage centre. It's difficult to run a self-storage centre well. And so you're putting in place basically stuff they're familiar with, but you're really training them to try and create the extra difference that made the difference between a reasonable return and a good return on the businesses that you were running. So yeah, it's— and that tended to be pretty consistent. That hasn't changed much over time, the kind of people that we're looking for. And the advantage of creating a business that was growing is that you could provide jobs for talent. So if you recruited, you know, the number of people we recruited who were sales advisors who became store managers over time was pretty high. So a lot of people were recruited from within. So that created a great opportunity for us to reward the talent that we brought inside the business.

Lots of our customers are growing quickly and opening up new sites and, you know, growing the business. And So, the journey from 1 site to over 100 is a really interesting one. What are the key things that unlock the ability to grow to that scale?

Well, yeah. I mean—

And to open the next site, what unlocks that ability to open up, go and open up the next site? When do you know when to do that? And what enables the business to go and grow to that scale?

It's sort of— we always had the ambition to create something quite large. That was why we got into it. So we didn't get into creating Big Yellow to buy, to become, to create 2 or 3 sites and hold them ourselves. And that was it. As an entrepreneurial business, it's all about capital. So how are you raising your money?

Mm-hmm.

We didn't come with family money, inheriting a family property and creating a self-storage asset and the sort of typical smaller operator route into self-storage. We were real estate guys who were very familiar. Our previous business had been quoted. We raised capital from the stock market, from various institutional investors. And so that was the pool that we were always going to go to. And going back to that pool allowed us to sort of have an expectation and a horizon that would have meant that we were going to create multiple assets. So we came at it from a sort of pretty different angle from most people.

Yeah.

We always had the ambition and the desire to create something that was going to be quite large. It's quite difficult for me to sort of answer that question in a way which is meaningful to a small operator who has very successfully opened a store, very successfully financed it themselves. But that may be the capital restriction they've got. And unless they bring in other family money or go to raise debt on the asset, it's going to be difficult for them to consider how they want to do it next. But yeah, we sort of, we came at it from a very different a very different financial horizon than probably smaller operators would. So I struggle to answer that question in a way I think that's going to be helpful, other than answering it from the point of view of where we came from, which is, you know, we were using— we started Big Yellow with our own money, but also 2 key financial backers who had been with us in our previous property business. We started the business and promised them that we would float the business and put it on the stock market, which allowed them to be able to sell shares to exit from the business when they wanted to, but also then allowed us to bring in other capital into the business through the stock market. So it's a very different route from how other people would see it.

At what point did you float the business on the stock market?

It was floated within 3 years of us creating the business. So we were on AIM within 3 years. And then on the main market 2 years after that.

So would I be right to say one of the big unlocks for growth there was Your capital strategy, your access to capital, and how that was set up?

Absolutely. I mean, that was our thinking about when we were creating the business, was how are we going to bring the capital in to allow us to grow to the scale that we had? Now, as I said, we didn't think we'd be getting to 115, 130 stores. But to get to 50 stores, you still needed a lot of capital. And our goal was to at least get to 10 stores open and 10 in the pipeline. So, you would need quite a lot of capital. The other point was that our focus was very much on London and the commuter towns around London, i.e., buying pretty expensive real estate. So again, you needed access to quite deep pockets to be able to focus on that area. And so, yeah, it was a different structure. And we had the experience because we had been directors in a previously quoted property vehicle. So we could repeat that and repeat the structure.

So, if you're an operator today, that might be part of the strategy, going on the public markets. At the other end of the scale—

Probably not today. They're being backed by private equity right now.

That's what I was going to say. So, at the moment, there's the route you went. Then there's the other end of the scale, which is financing it yourself, opening up one site, maybe opening up a second and owning all the business. But then we also do see a lot of operators today, private equity backed, And growing that way.

Yeah.

Is that— when is that a viable route for somebody who's currently operating or thinking about getting into stuff? Yeah.

So in real estate, that world has completely changed in the 30-year period in which we've been trading. So the private equity route was not really available, possibly available, but very, very limited in the late 1990s, early 2000s. Whereas today it's a complete— and the stock market was open to you. So I think the listed real estate sector at one point had over 300 businesses in it. Today is down to 100 or less. So you can see the number of property companies raising money from the stock market was a much more popular source of raising your capital in the early 2000s. Today, private equity and being backed by institutional investors is a much more— it's potentially a much more easy route to go. Easy route to go. It's potentially a much more active route to go than it would be using the stock market.

Yeah.

So that has completely flipped. There's still plenty of capital, it's just coming from a different source.

Yeah. Okay. So, just moving on now to more around operations of a business. So, what should an operator be measuring that most aren't today?

Well, we were obsessed with revenue and cost because any business lives by the revenue it generates and the cost it controls. So, those were always the mantra that was running the entire financial and operational side of Big Yellow. And obviously, revenue is driven by occupancy and rate, and cost is something that you have complete, you know, you have control over. Now, those were— we always drove the KPI performance of the business, was focused on those numbers. The bonus scheme was focused on those numbers.

Mm-hmm.

We felt culturally, it was very important that everyone in the business, from the sales adviser at the bottom to the store managers, to the area managers, to the senior leadership team, were all motivated by the same numbers. And those numbers were always year-on-year revenue growth and year-on-year earnings growth, i.e., revenue less cost.

OK.

And if you focus on those 2 numbers, then you would deliver the performance that you were looking for. So culturally, that has always been our focus, has been those numbers.

And so revenue is a function of occupancy and rate. How do you manage them? How did you think about the balance between occupancy and rate?

Yeah. Well, and this is sort of, we learned through experience. We did not have this as a sort of vision before we started the business, but that was absolutely the key to how we wanted to drive our business. So the two go hand in hand, and you want performance from both.

Yeah.

And I think some people get a little bit lost with obsession with occupancy at the expense of rate. And some people get obsessed with rate at the expense of occupancy. And somewhere in the middle is the right balance. And, you know, if the goal is to drive revenue, you've got your 2 levers to use. So either your occupancy is growing or your rate's growing, or hopefully both are growing. But if one is not growing, you need to push the other to grow revenue. And if your target is always revenue growth, then hopefully you will get the control of both those factors in the right place. But, you know, zero revenue growth, but 10% occupancy growth is not great because rate is falling down the cliff. And likewise. But if your goal is to grow revenue every year by 4% to 6%, then ideally you would like a bit of occupancy growth and a bit of rate growth to deliver that.

And then something we have talked a lot about, What I'd like to talk about is some of the tools that a self-storage operator can use in order to drive those things effectively, taking into account that it is a balance and it's not about maximising occupancy or maximising rate. And you have talked a little bit about this with us already before, but what are the key tools an operator should be thinking about to optimise revenue?

Sure.

Yeah, as they grow their business.

Yeah, yeah. Well, you know, we created a revenue management tool at Big Yellow, which you're now seeing used by many of the software support services that are bringing revenue management tools to the market. But there's sort of 3 key things that we would always look at is your rack rents and your other product costs. And every year making sure you move your rack rents. With inflation. So that's your sort of core. What is my room rent? What am I doing with my room rent? Where am I pushing that? Then you focus on your new customers and you have your demand pricing set up. You have your, you know, based on the occupancy of each room, you have a discount or a premium of your rack rent depending on what the demand is for that room. So that's affecting your moving customers and what rate they're then paying. And then you have the final leg of it, which is your existing customers and the pricing increase process that you push through with your existing customers. And we would always view that your price increase process is what pays for the discounts that you give to your new customers by the demand pricing setup. So all of these 3 elements are there hand in hand, the rack rent, the demand pricing setup, the revenue management tool for existing customers. And there's no one thing to focus on. It is the blend of all of those that generates the revenue that comes from your customers. And the management of those 3 areas is what you need to focus on to drive the performance out of your self-storage center.

A lot of our customers use these sort of tools in Stora. A lot don't. And when we speak to those customers, Sometimes they haven't touched a price for 5 years or even 10 years, and they're nervous about it because, I suppose, in some cases, they see the customers on a regular basis, they know them, and they're nervous about changing that price. What would you say to an operator who's got a fear about that revenue management side of self-storage?

I think you should look at storage as a utility. And in every other utility in life, you're getting a price increase, whether it's gas or electricity or your water or whatever it is, whatever utility you've got. So there's a natural cost inflation in the provision of your service. Do you want to pay your teams more money every year? They're expecting a salary increase. Your business rates are growing every year. So the local authority is taking money out of you. So In every business, there is cost inflation.

Yeah.

And that has to be reflected through to the service that you're then providing to your customers. So you cannot continue to provide a service if you do not generate a revenue growth from your business. And yes, part of that revenue growth is improving occupancy, but part of that revenue growth is charging the right cost to the customer who's moved into your business. And one way of looking at that would be if you've given them a discount on the way in, why wouldn't you give them a price increase a year later, 6 months later, whatever your process is going to be? So, you know, it's not unnatural in any business to look at increasing the costs on your customers if you yourself are receiving a cost increase.

Yeah.

So that would be the justification for it. And It's probably difficult when you are opening a brand new store to think like that, but it very quickly becomes like that. So after 12 months of operating, 18 months, 24 months of operating, you will have had various cost increases in your business. Now, you may still be leasing up your business and you may be happy that the growth in occupancy of your business is growing your revenue and that's providing for your cost increases.

Great.

But roll forward 5 years, 7 years, 10 years. That's not going to be the case. And so you're going to get to a point where your business has reached an equilibrium with its occupancy, at which point you can only stare at your existing customer base to do the price increase. So you're going to be doing it at some point. So you might as well adopt that opportunity as soon as you can. That would be our argument. So that's the way I would view it.

And so when we've spoken in the past, sometimes you've mentioned kind of almost like different phases. So, when you open up a new site, there's a couple of, one, well, 2 or more phases of fill-up. And in those phases, you might be focusing on slightly different things. What are those phases? And how do you think the focus should shift as you go through them?

We would typically look at the first phase, when you're opening a brand new store, is your fill-up phase. And we would look at that to about 50% of occupancy of whatever you've built out. So at that point, it is just about your new customers and pricing to those customers and filling the rooms that you have achieved. And then as you get some tension, by the time you get to 50% occupancy, you may be 70% occupied in some rooms and 30% occupied in others. And those rooms that are 70% occupied, you probably want to start pushing the rate slightly on because clearly those are the more popular room sizes.

Mm-hmm.

So you're starting to bring in the revenue management system at that point. So you should be getting to 50% occupancy within 6 to 12 months of operations. So basically, within 6 to 12 months, you want to start looking at a slightly more sophisticated revenue management tool. So that's how we would look at it. First phase, filling it up, 6 to 12 months long, then you get into mid-occupancy, taking it from 50% to 80%, and then the final phase, 80% to 90%, as how do you manage it in the higher occupancy levels? And our view would always be that you'd love a store at 100%, but actually, what you really want is a store at sort of 85% to 90% with a regular churn of customers, giving you an opportunity to sell to new customers, bring new customers in at higher prices, remove customers at lower prices, and be putting through your price increase process. So, yeah, those are probably your 3 stages, your initial fill-up, then your sort of mid-stage, 50% to 80%, and then the sort of micromanaging when you get to maturity.

And you still work with lots of self-storage operators, not just in the UK, but around Europe. Where do you see operators leaving money on the table most often?

Yeah. Well, it's probably in the sophistication of their revenue management. And that usually means they're being too aggressive on the discounting on the way in and focusing on occupancy, or being too lenient on the revenue, the price increase process once the customers got in the building. and not paying for the discount that you were giving away at the start. But that's probably the most— I mean, the sophistication of marketing has changed a lot as well.

Yeah.

You know, when we started, you put an advert in the Yellow Pages. Today, obviously, your pay-per-click campaign, your SEO campaign, your negotiations on social media marketing and Google and whatever you are using is a much more sophisticated marketing tool today. than it was 25 years ago. So, that undoubtedly has changed. So, yes, revenue management is important, but your online marketing campaign has become quite sophisticated as well.

So, you've obviously got to the stage where you weren't on site every day, obviously, when you've got 100x number of sites. So, when you aren't on site every day, what do you need to be able to see to know it's going well?

So, that's probably dealt with through a combination of factors. You want to see on a daily basis key numbers. The only thing you want to know on a daily basis is, what are my reservations looking like? What's my occupancy looking like? Because that's just immediate data. How many people have inquired yesterday? How many people have moved in? What's happened to the occupancy?

Mm-hmm.

So that's on a daily basis. On a weekly basis, you can start looking at occupancy performance and just seeing trends and direction of travel across a group as well as an individual. store. And then you can get into revenue really on a monthly basis. Revenue on a weekly basis is getting hard to calculate. Self-storage is this peculiar world where you can't actually have a detailed look at revenue till the end of the month because you don't know who's moved in, who's moved out, who's given notice, what deposits you've returned, etc., etc. So it's a peculiarity of self-storage is really, you don't really need to look at revenue on a daily basis. You probably want to look at it on a monthly and annual basis. So those are the sort of key guidance that you're looking for, big picture. I suppose if I was a smaller operator, then I would— that information is equally valid, makes no difference. But you got direct feedback then from either the store or the people in the store or your KPI numbers coming out of that store. On a bigger group basis, then you're talking to area managers in terms of what's happening in areas, and you can get a feel for what's going on through that. So It's different for the larger operators than it is for the smaller operators. But the core information that you're collecting and the frequency that you collect it really shouldn't matter whether you've got 1 store or 100 stores. It's the same points. I frequently see people with data overload, I would call it, too much information, which isn't really necessary. It's necessary information to look at maybe on a monthly or quarterly basis. It's not necessary to be looking at on a weekly or daily basis.

Yeah.

There's not a great deal that changes in self-storage, other than the direction of travel. I said, you can tell, and there is seasonality within self-storage.

Yeah.

And self-storage gets affected by external factors, whether that's news headlines or general elections or changes of leadership. You know, all these things affect people's confidence and decision-making processes, which affects what goes on in the daily life in self-storage. So, a lot of that, you're going to struggle to— these are all big things that are influencing what your customer base is doing. So, you're just looking at directions of travel on the short term, and then you can start looking at more detailed data on a monthly or quarterly basis. That's how we would always look at it.

If you are a small operator now today, with 1 or 2 or 5 sites, and you're competing against a much larger operator with 100, 150, 200 sites, Is there something— is there— what do you think a small operator advantage is that they could leverage now in their business?

It's a very good question. And I think what you have to focus on as a smaller operator is the uniqueness of your service and your asset. So, you're either going to go down the, I'm going to be the cheapest person in town with the simplest service and save cost, Or you're going to be going down the, I'm going to offer a local service, drill into my local catchment and create a feeling of something that's town-specific and therefore drilling into its sort of local catchment rather than a sort of big amorphous national operator.

Yeah.

So yeah, you'd probably, those are the 2 ways you'd go is cheapest, simplest, or local, most local feel like you're offering something that a national operator can't operate and push yourself in either one of those 2 directions. But I would always say, the other thing I would say to you, you don't need to— all you need to do with a national operator is sort of hug their pricing system and just be 5% cheaper. I can't see why you'd be any more than that because that should distinguish between the choice that the customer wants to make at that point.

Yeah.

There's no point in being 20%, 30%, 40% cheaper than a national operator, because you're just giving price away to the customer at that point.

Yeah. Okay. If you think forward 5 or 10 or even 20 years, who do you think the winners will be in this industry? And what do you think they'll be doing that everybody else isn't?

What I've really noticed actually, most recently, is that I think self-storage is now morphing into 2 or 3 different markets. So the market that Pigello was in was the traditional multi-storey high-rise city centre market. And that is going to continue and will exist. But that's had a very strong run in the UK now for 25 years. Great opportunities throughout the rest of Europe, in Germany and France, Spain, etc., to continue for that market to grow. But I do think there's 2 interesting adjuncts that come away from traditional self-storage. And the first of those is what I call sort of metro storage. So very small boutique micro unmanned storage centres right in the city centre. So your sort of Zone 1 catchment of London, how do you get self-storage inside there? Well, it's very difficult to buy a piece of land, create a multi-storey asset and do that. There are some operators who can do that, but it typically takes a long time and a lot of capital. And these are big investments. Whereas you can open smaller, might be leases, might be freehold interest, but smaller micro centres in city centres that can get storage to the centre of the cities. And then the other side of the equation is going completely the other way and saying, okay, well, traditional self-storage requires a 1-acre site and a sort of of 3-storey buildings. So you're spending £4, £6, £8 million to build one of these centres in the UK. Why don't we go to a smaller single-storey drive-up concept?

Mm-hmm.

And smaller towns, catchments of sort of 25,000 to 30,000 people, smaller stores, quicker build, cheaper construction cost, and you can provide a service then at a much lower cost.

Mm-hmm.

I think we'll find that all those 3 markets will continue to grow. And in particular, we've focused on the traditional self-storage multi-storey market for the last 25 years. But actually, there'll be much more focus on drive-up and on metro storage over the next 15, 20 years. So if I look forward, I'd see, I think those markets offer the growth in the UK more than traditional self-storage.

OK. And if you looked across Europe, you'd find all 3 And do you think within those 3 sectors, so you've got the traditional self-storage, you've got the very small metro sites, and you've got then the drive-up, lots of people will be trying to win in all 3. Do you think there's an approach for any of those that you think is going to win over the next 10 years that you would encourage people to think about?

Well, The first point I'd say is they're all self-storage.

Yeah.

I mean, there is no difference between a drive-up storage unit, a traditional unit, and the Metro storage unit. So they are all basically serviced real estate businesses. And in terms of then the second point is, or the second part of your question was, you know, is there a different way of managing them? Yes, they are different services in terms of, you know, drive-up and Metro storage will probably predominantly be unmanned. There is far less of a need for the customer service side of it, whereas the traditional self-storage size, especially in larger units, especially more metropolitan location, the sort of stronger the urban location, there's, you know, you need to fill the bigger stores. You need a combination of your B2B and B2C customers. If you're trying to offer that service, you probably need some people.

Right.

A drive-up storage platform is just, because it's smaller and simpler and more formulaic, it's much more easy to sell. A metropolitan storage is, again, much more formulaic, much smaller average room sizes. You know, one is very focused on B2C, one is very focused on B2B, and you can sort of, you can drive your platform accordingly. So I think you'll find those will operate in different ways from traditional self-storage. But yeah, they are all slightly different. And then I suppose you would say it could be very different if you are in a fringe urban location rather than a suburban location. So, you've got different management styles coming in for different assets as well.

Okay. So, if you were starting again today from scratch with £1 million, and maybe that's not enough, maybe £5 or £10 million, and 5, 10 years ahead of you, With it, to go at it?

Yep.

What would you do differently today, or what would your strategy be?

Um, that's such a good question. Um, I think if it was— if my ambition was to, to keep my business controlled and me to run the business, then I think I would focus on drive-up storage and try and do— it's a much smaller capital outlay, it's a much simpler system to be If I had ambition to create a sort of bigger company, then I would definitely focus on the traditional self-storage market and sort of focus on the bigger stores and bigger locations. Requires more operational footprint, more management control, and has probably got a sort of bigger capital base of people who want to be going into it. But yeah, I mean, I still think self-storage is a fantastic industry.

Yeah.

I still think there's plenty of opportunity across Europe as to where that capital could go. and where the opportunity is for people to open and develop self-storage centres. And I think operational real estate is a fantastic sector for us all to be in. So I have great— I have a very positive outlook for it all. What would I do? Well, that depends on your personal ambition and which direction you want to go.

Yeah.

Do you want to have a business that you run and own yourself, or do you want to create something which is larger, which has got other investors in it, which has got a greater ambition. But, you know, they're both very good models. They both have their pluses. They both have their disadvantages. But they all, within the self-storage sector, I think, offer fantastic possibility.

Just to clarify, when you say drive-up, what sort of facility do you mean there?

What I would mean by drive-up is a modular system, probably with a larger than average room size, so 150 to 250 square foot. Modular, meaning that there isn't much choice in that room size. It's probably 2, maybe 3 room sizes and drive access straight to the door. So single storey.

Okay. So that would be typically like garages type of thing. Is that right?

In the old days, it would have been just—

Could it be containers as well or no?

Yeah, no, no. I mean, it could be. I mean, you have containers, you have prefabricated containers, and you have self-storage. You have purpose-built self-storage. So there is a blend of all 3 that could be used. And you could find, you could buy a container operator, you could convert that container operator into some fabricated purpose-built units. You could have a blend of both. I mean, the only, you know, I think in my mind, the fundamental difference between containers and purpose-built storage is it's an institutional product.

Right.

The demand to buy that product, if you wanted to sell it, is less in containers than it would be in a purpose-built self-storage environment. It doesn't mean to say that containers are any better or worse, but I think if you were trying to create multiple sites, multiple locations, and sell it, then you would be better in a purpose-built environment. If you were just looking to manage your cash flow and get the best return you possibly could from a piece of land, then there's a perfectly good argument to be leasing containers or buying containers and renting those out.

When you say institutional, You mean the bottom line there is that you'll get a higher multiple on the business if you decide to sell at some point?

Exactly.

Right.

Exactly. There's also just a deeper market of people who would look at it. Whereas if you're just a pure container operator, there is a market, but there are fewer people who would look at buying container operators.

Okay. Is there any one thing you find yourself telling self-storage operators over and over again?

I mean, it's my experiences in self-storage has led me to, well, to reassure the point that, A, I think it's a fantastic industry, operational real estate and self-storage in particular. I think it's a great industry to be in. B, I think there's a fantastic European opportunity, not just European, global, but just being realistic about our sort of local, our The areas that we're all living in. I think there's plenty of opportunity to achieve all of that within Europe. C, it's been an amazing industry in terms of resilience. And that isn't just business resilience. That's resilience to other things that could replace it. I mean, if you think about what's been going on in retail over the last 30 years, what's been going on in the office environment, what's been going on in the hotel environment. environment, self-storage has been remarkably consistent and has been an active generator of revenue. You have been able to occupy buildings. You have been able to push rent increases through. And that's because there is a demand that has grown and grown and grown in the business. And my final point on that would be awareness is still incredibly low of self-storage. It is not yet a full consumer understood product. Big Yellow, when I retired 2 and a half years ago, still 70% of move-ins had never used self-storage before. So, you know, you've got the best product or the most— the best brand in the UK. Brand recognition for Big Yellow was running conversely at 70%. People had heard of it, but only 30% had used self-storage. So, So you've still got fantastic awareness out there to grow into. And that's the potential, really. And those numbers will be, okay, fine. They may be the same in Holland, might have similar Norway, Sweden, which are all quite mature self-storage markets. But brand awareness and understanding of self-storage in Spain, Portugal, Italy, Germany, Eastern Europe will be incredibly low still. So the potential is out there for this industry to continue to expand. Because people don't know it's there.

Yeah.

That is still the sort of battle that will be won. In America, in Australia, awareness levels are way, way, way higher. And yet still, their markets are growing. So, you know, who knows, would we ever get to those levels? You don't need to. All we need to know is that in the UK, there's about 1.1, 1.2 square foot per person. It's not inconceivable that can get to 2 square foot per person, 2.5 square foot per person. So double the scale of the market. Which is still nowhere near the 10 square foot per person that there is in America. So the potential through awareness, through changes in society, through how people use storage, business and consumer, gives it the potential to be a great long-term business. So yeah, I think the outlook's still very positive.

How do you think technology has changed industry and where do you think it's going?

It's very, very interesting, that question, because once we started, well, when we started back in 1998, technology didn't really change very fast. But that was pre-internet, which is hard to remember those days. So I suppose we then evolved into having a website. You evolved into more, you know, most of your customers phoned you or walked in. Now they're coming, you know, 90%, 93% of Big Yellow's queries would have come through its website today. So the world has completely changed in that 30-year period. And then on top of that, we have the most recent developments in AI and software systems that are supporting businesses, which, you know, Storj is in the thick of that service provider at the moment. So I think we're at a really interesting point in adoption of technology into self-storage. Whether that's through customer-facing portals and interaction with chatbots, AI consumer, AI call centers, you know, the sort of the ability for us to be able to service what a customer needs through using technology rather than using human beings. Through adoption of technology and systems. Whether it's revenue management, whether it's routine operational software, whether it's CRM systems, all of the sort of systems that we operate. I mean, you're even seeing it now in facilities management. I mean, we were just adopting at Pigello a brand new facilities management software which allowed the stores to then report all their incidents, provide the details, us to then contact the suppliers, all seamlessly without involving a human being.

Right.

involving the human at the start of it in terms of what the store reported. But technology is now really starting to firmly stamp itself in every operational aspect of self-storage, which 25 years ago, 30 years ago, it did not.

Yeah.

So I think technology is the big discussion point going forwards. There are, we've discussed in this podcast, both manned versus unmanned stores. There is no right answer. It is horses for courses. You know, in a building of 130,000 feet with 4,000 customers, you'd never get that building occupied, managed, run safe, secure with no human beings on site, would be my view.

Mm-hmm.

Versus a building which is 10,000 feet with With 200 rooms and 2 or 3 customers coming and going a day, easy to manage that remotely. No need for human beings there to be present on site. So, you know, it depends what you're talking about as to how man versus unmanned worked. But technology is undoubtedly changing how investors and operators of self-storage feel that they can manage their assets to maximise the performance. and achieve the key parameters that we're still looking to achieve. So it's exciting times. I think there's a lot of— it's happened since I've retired. A lot has changed in technology and a lot will change over the next few years. So yeah, no, very exciting time.

Iain, thank you very much. It's been great to have you on. And yeah, thanks for watching and we'll see you again soon.