GOT SPACE? BOOMING SELF-STORAGE INDUSTRY ATTESTS TO ONGOING ECONOMIC INSTABILITY IN SOUTHLAND.

Byline: Barbara Correa Staff Writer

If you build it, they will fill it. That truism is holding up for Southern California's booming self-storage industry, which has added a million square feet of storage space in the last two years alone.

Despite the lingering economic downturn, it turns out people are just as willing to pay for a place to store life's detritus now as they were during flush times, though for different reasons.

When the economy is strong, the self-storage industry benefits because people have more money to buy stuff and pay for space to keep it, said Donna Hosanna-Marr, manager of Store for Less in Long Beach.

But self-storage companies also benefit when workers lose jobs and start to downsize from a home to an apartment or move in with family to cut expenses, creating an instant demand for storage space.

``Once the economy starts to go down, we get busy,'' said Hosanna-Marr, who's seen the effects of boom times and recession in her 14 years as manager.

People who choose to rent a storage space to keep things that have sentimental value or belonged to a relative or just require too much effort to liquidate account for roughly one-third of storage renters, said Harvey Lenkin, president of Glendale-based Public Storage Inc., one of the few publicly traded storage companies in the United States (about 85 percent of the industry is privately owned and operated).

That one-third of the market has declined in the last 18 months or so amid job losses and reduced discretionary income, he said.

But demand from the other two-thirds of the market - people relocating to the region, college graduates moving back in with parents and retirees moving to group living facilities - continues to grow, resulting in higher occupancy rates.

``The occupancy levels of same-store facilities were higher at the end of April than they were a year ago,'' Lenkin said.

Dawn Sanchez, live-in manager of San Dimas Lock-Up, said the war in Iraq brought her some new clients - as spouses of military personnel sent overseas moved in with family for convenience or to save money.

College students from nearby Azusa Pacific University and Citrus College returning home for the summer always boost business this time of year, she said.

Sanchez estimated 10 to 15 percent of her tenants are small-business owners who need space to store equipment or merchandise and who don't need a storefront. ``If you can pay $230 a month instead of $2,000 a month for a storefront, self-storage is the way to go,'' she said.

Her small-business renters - who tend to stick around a lot longer than the average transient stay of seven months - include landscapers who don't want to haul home their mini bulldozers and gardening equipment, vending machine entrepreneurs, antique dealers and people storing packaging material.

In a way, the proliferation of storage facilities itself has created the demand for more. ``There has to be supply to create demand,'' said R. Christian Sonne, principal of Self Storage Economics, an industry research and consulting firm in Huntington Beach.

Does that mean people are more likely to become pack rats if given the opportunity?

``The data would suggest that, based on demand every year,'' Sonne said.

The Self Storage Almanac, used by storage businesses to determine the going rates, has not historically tracked demand for storage space by state. But for the Western region, which includes California, occupancy has fluctuated between 82 and 92 percent in the last decade, hitting 92 percent for the first time last year.

What's striking about the data is that occupancy rates remained relatively stable even as the number of new facilities built in California jumped almost 25 percent from five years ago, to over 3,600 in 2002, according to the 2003 Self-Storage Almanac.

Space bubble?

Self-storage as an industry took off in the early 1970s, along with burgeoning real estate development in Southern California. Public Storage Inc. started, and still is, a real-estate investment trust.

Recent conditions in the Southern California real estate market - low financing rates and attractive returns - have attracted a lot of newcomers, who see self-storage facilities as a cheaper way to invest than building commercial or residential units. The decline of manufacturing activity in the region is also prompting more conversions of warehouse space for self-storage ventures.

The influx of investment in the last two years is creating somewhat of a local supply bubble, which could pop next year, said Sonne. ``I think we're on the edge of oversupply. ... Since a lot of people have considered L.A. a relatively safe haven for real estate, it continues to create demand for (building) self-storage product.''

At the moment, demand from storage-space seekers seems to be keeping up with supply, with average occupancy at Los Angeles County facilities holding steady at around 88 percent.

And while some interpret the popularity of storage units as proof of society's materialism, the real secret to success for self-storage businesses has more to do with stockpiling than buying.

A substantial slice of the renter market is made up of people saving items that belonged to a relative and they just can't bear to throw out - such as old family photos, said Lynn Van Skiver, manager of Baseline Personal Storage in San Bernardino.

Indeed, the urge to store is universal. Self-storage is huge in rural states with plenty of open space, like Montana and New Mexico, the state with the highest rate of self-storage per capita in the United States, said Sonne.

U.S. storage companies that have branched out to foreign countries have been surprised by the consumer response.

``It's an export industry,'' Sonne said. ``It's growing into Europe and Asia; in Hong Kong it's doing extremely well.''

Trash or treasure

``We live in an age of pack rats,'' Sanchez of San Dimas Lock-Up said. As manager, she gets inside knowledge of what people store when she has to auction off holdings of tenants who don't pay their bills. Frequently, she finds mundane trappings of everyday existence, not even worth the monthly storage rental.

``You'll find particle-board furniture, old parking tickets,'' she said. ``We just had an auction on Saturday - it was just trash.''

Whether it's trash or treasure, storing is addictive. A lot of longtime storage renters find that instead of downsizing or getting rid of their things, the storage space contents tend to expand over time, despite their good intentions.

Bill McIlhany, video archivist for the Magic Castle, a magician's private club and restaurant in Hollywood, rented two storage spaces in Westwood six years ago after filling a second condo with magic tricks, carrying cases and videotapes and books about magic. He pays $450 a month for the space but says it's a necessity.

William Jimerson, a special education teacher who lives in Long Beach, has tried to downsize his holdings over the years since renting a storage space in 1989, but without success.

``Every year I would think about getting a smaller unit, but the reverse happened,'' said Jimerson, who originally rented the space to store things he started buying at antique sales as a college student. Eventually, he upgraded to a $185-a-month space ``you could park a car in.''

Along with a pair of vintage Barcelona chairs and two massive Sound Lab speakers, his space holds school supplies and books he picks up at the book sales he frequents.

Jimerson says he sometimes wonders if he owns the stuff or it owns him. There is, however, a method to the madness.

``Everything I have in storage is all geared to (my) one day owning a home,'' he said. In the meantime, the storage space doubles as a place for his teenage son to practice his drums, well worth $185 a month. ``That's money well-spent right there,'' said Jimerson.

Barbara Correa, [phone]

barbara.correa(at)dailynews.com

CAPTION(S):

2 charts, drawing

Chart:

(1) Expanding space

(2) Occupancy rate

Drawing:

(color) no caption (Self storage boxes)

SOURCE: Self-Storage almanac

Warren Huskey/Staff Artist