Electronic Health Records (EHR) -- Pharmacy Self-Storage Research Paper

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Electronic Health Records (EHR) -- Pharmacy

Self-Storage industry

Self-storage (short for "self-service storage," also known as "mini storage") is a substantial industry in the U.S. And globally. The U.S. self-storage industry comprises some 50,000 facilities. The Self-Storage Association estimates that the industry generated total sales revenues in 2009 of more than $22 billion. The average size of a self-storage facility in the U.S. is approximately 46,200 square feet of rentable space. (SSA, 2010).

Self-storage "facilities lease space to individuals, usually storing household goods, or to small businesses, usually storing excess inventory or archived records. The rented spaces, known as "units," "rooms" or "lockers" are secured by the tenant's own lock and key." (Self-Storage, n.d.). The standard operations and policies of self-storage facilities are typically as follows:

"Facility operators do not have casual access to the contents of the space….A self-storage operator never takes possession, care, custody or control of the contents of the storage rental space unless a lien is imposed for non-payment of rent. Self-storage facility operators frequently provide controlled access to rental space areas, individual door alarms, interior units lights, and security cameras. Goods or items stored are either not insured by the self-storage operator, or insured only to a minimal degree; possessions stored are at the tenant's "own risk" or can be protected by tenant-purchased homeowner's insurance or buy purchasing self-storage tenant insurance." (Self-storage, n.d.).

There are 5 major players in the industry: "4 public companies (Public Storage, Extra Space, Sovran and U-Store-it REITS -- Real Estate Investment Trusts), plus U-Haul (a public company / non-REIT)…who [together] own and operate some 4,750 self-storage facilities, or about 10% of all primary facilities (or 9.5% of all U.S. facilities)" (SSA, 2010). In addition, "another 30,230 (non-Top-5) companies…own and operate the remaining 45,250 self-storage facilities (an industry-wide average of 1.5 "primary" facilities per non-Top-5 company)." (SSA, 2010). These figures are somewhat inconsistent with those reported by the Self-Storage Almanac 2008 which reported that

"82.9% of the industry ownership is in the hands of small mom and pop operators. These operators have little or no branding or company image. About 10.3% are owned by the top five operators: Public Storage, Extra Space Storage, U-Store-it, Sovran Self-Storage and U-Haul. The other 17.1% is made up of the top 100 operators, which own or manage from 7 to 247 facilities." (Self-Storage FAQ).

But despite these discrepancies, the picture of an industry with a few large players and a majority of small, independent operators is clear.

Environmental Forces (STEEP)

1.

Social. Demand for self-storage services is driven by population growth, mobility (which is often driven by life changes such as marriage, divorce and job change), and consumer spending. In recent decades, the trend has been an increase in storage usage by U.S. individuals and families. Nearly 1 in 10 U.S. households (HH), or 10% (10.8 million of the 113.3 million U.S. HH in 2007) currently rent a self-storage unit; that has increased from 1 in 17 U.S. HHs (6%) in 1995 -- or an increase of approximately 65% in the last 15 years.

Additionally, military deployments related to the Afghanistan and Iraq wars could also be a contributing factor to this increase since 2002. "More than 700,000 self-storage units nationwide are rented to military personnel (4% of all units); however, in communities adjacent to domestic U.S. military bases military occupancy can be from 20%-95% of all rented units." (SSA, 2010).

2.

Technological. In recent decades, the most significant technological change in the industry was the development of portable storage units. "The self-storage industry was revolutionized when portable storage was introduced. Portable storage takes away the hassle of hauling personal belongings to the storage facility. Portable storage can be used to help people move, as well as, to add convenience for people wanting to store their belongings for a period of time. (Self-Storage Industry Trends). Companies that are leaders in this growing segment of the market are franchises Big Box Storage and P.O.D.S., an acronym for Portable on Demand Storage. Door to Door storage has also established a recognizable brand in many regions. Typically mobile storage units are a bit more expensive for the customer than fixed self-storage facility prices. It is difficult to compare as unit sizes and amenities vary, but a mobile unit might average $230/month for and 8x8x12-foot space, versus approx. $140 for a 10x15 fixed location unit (How Much Does Self-Storage Cost, 2010), but mobile units offer added convenience.

New construction techniques are also impacting the industry. "There have been considerable levels of investment in developing new construction techniques for this mature industry…the implementation of movable walls within mini warehouses and self-storage units has provided greater flexibility to both customers and operators." (IBISWorld, 2010).

3.

Economic. The economic downturn and recession from 2007-2010 has impacted the self-storage industry. For example, the slump in the Real Estate market affects the storage industry in particular, because often, when people are selling their homes, they will need to move quantities of stuff out of their house and into storage to prepare the house to be shown to prospective buyers. (Lucas, 2009). Nevertheless, the industry saw overall revenue growth of 2.5% in 2009 (IBISWorld, 2010).

Fewer than 250 new self-storage facilities came online in the U.S. during 2009; the trend in new construction is down significantly the last four years (SSA, 2010). This slowdown in new construction may also reflection some consolidation in the industry (Sonne, 2007). Public Storage, taking advantage of its solid financials and leadership position in the market, has just acquired 30 existing storage facilities in the Los Angeles area (Public Storage, 2010), giving it the opportunity to further increase its market footprint and visibility in that region quickly, but without any new facility construction that would risk over saturating existing markets.

On additional affect of the economic downturn, in particular within the real estate market is that, while it may have sustained or even increased the number of customers displaced due relocation, many relocations are being driven by foreclosure. Because these customers are more likely to be in constrained financial circumstances, operators have some concerns about the viability of these customers.

4.

Ecological. From an environmental/ecological standpoint, self-storage facilities have exposure to and can be held liable for a range of environmental risks. Appropriate liability insurance can help mitigate these risks for a self-storage operator. Some of the risks include: abandoned hazardous waste, "midnight dumping," mold, hazardous runoff during rain events, accumulation of petroleum hydrocarbons in the soil, and misuse of self-storage spaces involving activities unknown to the facility manager. (ArticlesBase, 2010).

5.

Political/Legal. Political, regulatory, and legal forces impact the self-storage industry in several ways. First, in the area of real estate taxation. All storage companies -- whether fixed location or mobile -- must maintain land and buildings to hold stored items. Currently, the average self-storage operation "pays between $30,000 and $40,000 per year in local property taxes. The entire industry pays more than $3.0 billion per year in local property taxes nationwide." (SSA, 2010). As real estate values have declined in many U.S. markets during the recession, property taxes may be correspondingly reduced.

Another legal consideration for storage companies are the laws around liens and bankruptcies, for example, what happens when a customer stops paying and the storage company is left with goods on their hands? Industry groups lobby for favorable lien laws, e.g., efficient and streamlined lien notification processes.

Mobile self-storage companies also face some additional regulatory issues, as some municipalities have passed or are contemplating regulations that impact placement and use of mobile storage units.

"Typically, the laws restrict placement of the containers, the amount of time a container can stay on a particular property, and the number of times a container can be delivered to a particular address. Some municipalities also adopt ordinances that limit the maximum cubic feet a container can occupy, the total number of containers that can be in place at any time, and even the allowable uses for the containers." (Pascal, 2009).

Several ordinances require permits for placement of mobile storage units, increasing the cost/price. In recent years, the Self-Storage Association has helped develop model legislation to help ensure the community needs are addressed without undue burden on self-storage operators.

Industry Analysis

The following is an examination of the industry from a framework of Porter's "Five Forces."

1.

Threat of Substitutes. Threat of substitutes is very low. The options that customers have in lieu of self-storage include selling off the items, storing them on the customer's own site, purchasing permanent warehouse or storage facilities, or destroying the items. However self-storage offers the benefits of flexibility (short or long-term to suit the customer's needs), ease/convenience (items can be removed from a customer's location to clear space for other uses, but still available when the customer has use for them again), options (selling the items is permanent; storing them will make them available again in future if the customer has a need. Storage can often be less costly than replacement), and affordable (does not… [END OF PREVIEW]

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