In 2018, the self storage industry was defined by high development activity across the country. Nationwide, units under construction and in the planning stages account for 9.7 percent, according to the latest Yardi Matrix report. Yet, due to limited opportunity for new development, construction activity in California remained flat. Markets such as San Francisco and the East Bay did not experience any growth over the past month, Yardi Matrix data shows.
Sharespace, however, provides an alternative storage option in the constrained western markets. The San Francisco-based startup offers an Airbnb-like solution to storage. Commercial Property Executive reached out to Daniel Kluesing, chief executive officer of Sharespace, for insights on how the sharing economy might become a game changer in the self storage business.
How does Sharespace work?
Kluesing: Sharespace is a marketplace for unused space in homes and apartments─garages, extra rooms, storage closets. Customers looking for storage are matched with neighbors who have an appropriate space to store their items. Once a customer has moved their items into the neighbors’ space, the neighbor receives a payment each month, earning income from otherwise unused space. The Sharespace platform manages pricing, matching, schedule coordination, government ID collection and payment.
What are the benefits of using Sharespace? What does it bring to the market?
Kluesing: In many densely populated areas, it simply isn’t possible to build new storage warehouses. As a result, storage options are prohibitively expensive or only available several miles away from where a customer lives. Sharespace brings new storage supply onto the market in these areas where it is expensive, or impossible, to build new storage warehouses. By adding supply near to where consumers live, Sharespace aims to help give consumers access to lower cost, convenient storage options.
What are the challenges of implementing such a concept in the storage sector? How do you plan to overcome them?
Kluesing: There’s a huge range of spaces available─from closets that can store a few boxes to multi-car garages that can store an entire house. Efficiently and accurately matching the items customers need to store to the right space that can accommodate them is one of the biggest challenges Sharespace helps solve through our in-house developed software platform. At the end of the day, we view ourselves as a technology company building an index of 3D spaces in the real world and matching those spaces to the best possible use.
How does Sharespace address the issue of security?
Kluesing: Trust and security are incredibly important to Sharespace and are ultimately the core of the platform. All Sharespaces are required to be secure and lockable. Beyond this, there are three characteristics that make Sharespace safer than traditional options:
First, unlike a traditional warehouse, Sharespaces are spread across many locations, so thieves cannot break into multiple units in a single night. This alone makes Sharespaces less attractive to thieves than a centralized warehouse where they can hit multiple units.
Second, we never publish or expose the locations of Sharespaces except to the customer who will be storing things there. This makes it harder to target Sharespaces than warehouses with published addresses and hours of operation.
Finally, unlike a warehouse that may be unstaffed for long periods of time and is in industrial parts of towns, Sharespaces are in people’s homes, in residential neighborhoods, with many more eyes watching for suspicious behavior.
How can the sharing economy change the self storage business?
Kluesing: We hope to give customers more options. In the same way that Uber and Airbnb have given travelers new options, our objective is to give customers a richer set of storage options to choose what best meets their needs.
Our first goal, as we bring new supply to constrained markets, is to help people find affordable storage. We think rate hikes are fundamentally anti-consumer, so we are bringing a model to the market where we grow revenue by adding more supply rather than raising prices and, as a result, change rate hikes from being a standard operating procedure to being outlier behavior.
Our longer-term goal is to unlock new use cases for local storage. When you have a Sharespace on your block that you can walk to, new use cases for storage become possible, even if you only had to drive a mile away. Think of a new parent looking for a place to store their running stroller that only gets used on weekends. We ultimately hope to expand the storage market with these new use cases that simply aren’t possible with the existing services today.
We’re also excited to help grow thousands of “home businesses” for our neighborhood hosts. Giving them an easy way to earn money from space that would otherwise go unused could help them pay their mortgage faster or take an extra vacation with their family.
Could Sharespace be a solution to the shortage of storage supply on the western markets?
Kluesing: Especially when looking at population centers like the Bay Area and Los Angles, where land is at a premium, we don’t think it makes sense to use valuable real estate for warehouses. It’s expensive and it’s a bad use of land near the urban core. We think it’s a friendlier approach to integrate multiple uses into the existing building stock, so those existing buildings better serve the community needs. People will always be able to cheaply construct a warehouse outside of the population center, but then the things people are storing will be far away and less convenient.
Sharespace is available in San Francisco and is now expanding to the East Bay. What are your growth plans?
Kluesing: We will continue to expand through the East Bay and into San Jose over the first half of 2019 and hope to have general availability through the entire Bay Area this summer. We’ll then be looking at opening up service areas throughout California. We rank metros that have a large population and a built out dense suburban region─naturally, Los Angles, San Diego and Sacramento are high on our list. My co-founder was previously a general manager at Doordash, and we think about city expansion in a similar way, building playbooks that can be operationalized to allow faster expansion with each city we add.
Image courtesy of Sharespace