BY STEPHEN BREINING AND ANDREW BONNIS

BY STEPHEN BREINING AND ANDREW BONNIS

ost growth strategies in self-storage point at the same kind of place: a fast-growing suburb, a dense corridor of new rooftops, a metro with strong in-migration, and traffic counts that practically underwrite themselves. It makes sense on a spreadsheet, which is why so many operators are chasing those markets, and why they now spend much of their time bidding against each other for the same land and the same customers.

We decided to invest somewhere else. We build in underserved communities where a professionally operated storage facility meets a real local need: places like Dardanelle, Ark.; Mount Airy, N.C.; Reidsville, N.C.; or Richfield, N.C.—markets that rarely show up in national acquisition decks. The kind of town with one main road, where the population would fit inside a single city block somewhere else.

The reaction we sometimes get is a version of “Why there?” It’s a fair question, and the honest answer has two halves. These markets come with real disadvantages that the bigger operators are right to weigh. They also come with advantages those same operators are structurally unable to capture. The case for secondary and tertiary markets only holds up if you are honest about both.

Start with why the national players overlook these towns in the first place. It isn’t an oversight. Their model is built for scale, and scale needs density.

A real estate investment trust underwrites to growth, which means it needs markets that can absorb large facilities, support high absolute rents, and lease up on a predictable schedule. A 300-unit building in a town of a few thousand people does not move the needle on a national balance sheet. The data those companies rely on (population density and traffic) screens small markets out before a human ever looks at them. They are not wrong. They are playing a different game.

Let me be clear about exactly what you give up. The first thing is rate. You are not going to charge metropolitan prices in a rural county, and your revenue per square foot will sit below what the same building would earn in a growing suburb. The absolute numbers are smaller, and you must be comfortable with that from the start.

The second tradeoff is time. Demand in a small market is shallower, so a new facility fills more slowly. In a dense metro, you might lease up in 12 to 18 months. In a town of a few thousand, you underwrite to a longer ramp, and you mean it, because there simply are not as many people who need a unit in any given month. If your model depends on fast lease-up to service debt, these markets will test that assumption.

The third is ceiling. A small market caps out. You cannot count on an endless flow of new demand to absorb supply and push rates the way you can in a place that adds rooftops every year. Once you have captured the storage need of a town, you have largely captured it. That puts a real limit on how big any single market can become, and it means growth must come from adding markets rather than squeezing more out of one.

The fourth tradeoff is the one operators underestimate most, and that is marketing. In a metro, you buy visibility. You bid on search terms, you show up on a crowded results page, and demand runs deep enough that paid advertising reliably produces leads. In a town of a few thousand, search volume is so thin that paid clicks are scarce and often surprisingly expensive per lead, and the handful of people searching usually already know the one or two options in town. The auction-based playbook that works in cities mostly does not translate.

Now the other half. The first advantage is the most obvious one once you see it. There is little competition. In many of these towns you are the only modern, secure, well-run facility, or one of two. There is no race to the bottom because there is no one to race against.

That changes the pricing picture. You are not defending market share against a national operator with a deeper budget and more patience for a price war. You are meeting a need that someone must meet, and that position is worth more than a few extra dollars of per-foot rent in a market where you would be one of 15.

The second advantage is tenancy. Customers in small towns stay longer. People move less often, life is less transient, and the reasons they rent storage (an inherited estate, a growing family, a small business with no warehouse, a boat or an red RV with nowhere else to go) tend to persist for years rather than months. In a lot of these towns, the local economy leans on agriculture, trades, and small manufacturing—work that keeps people rooted, and rooted people do not empty a storage unit every spring.

Lower churn quietly reshapes the entire economics of a facility. The expensive part of this business is replacing tenants who leave. Every move-out means a cleaned unit, a fresh marketing spend, and a stretch of empty days before the next customer signs. When a customer stays three years instead of nine months, the cost to acquire them spreads across far more revenue, and a facility that looks unremarkable on a rate sheet can outperform a higher-priced one that churns constantly.

The third advantage is cost. Land is cheaper, construction is cheaper, and your basis in the project is lower from the first day. That is what lets the lower rates pencil. A facility you built for a fraction of what the same square footage would cost in a metro does not need metro rents to produce a strong return. When operators look only at the rate and conclude these markets cannot work, they are forgetting the other side of the ledger.

One more advantage is worth naming, with a caveat attached. Being the only option in town gives you real pricing power, including on the kind of rate increase a tenant in a crowded metro might refuse. That power comes with responsibility, though. In a market this small, reputation travels fast, and an operator who pushes too hard on price hears about it quickly.

The marketing challenge, the one I listed as a downside, has an upside hidden inside it. Because you cannot simply buy your way to visibility, the things that win are presence and reputation, such as an accurate Google Business Profile, real reviews from real neighbors, signage people drive past every day, and being the name that comes up when someone asks a coworker where to store their things. It helps that we hire locally and answer our own phones, so the person a customer talks to often knows the town as well as they do.

That kind of standing takes time to build and cannot be shortcut with a bigger ad budget, which is precisely why it lasts. Once you are the trusted local option, a national operator cannot outspend you into irrelevance, because the thing you have is not for sale.

This is what the larger operators miss, or more fairly, cannot afford to prioritize. The industry has trained itself to optimize for revenue per available square foot and speed of lease-up, and those metrics genuinely favor dense, growing markets. But a stream of low-churn, low-competition cash flow in a market many national models overlook is a different kind of asset. It is less liquid and less glamorous, and it will never be the subject of a press release. It is also remarkably defensible, because the same factors that make these markets unattractive to a REIT (small size, slow growth, thin data) are the moat that keeps competition out after you arrive.

I want to be careful not to oversell it. This is not a strategy for everyone, and it is not a strategy for impatient capital. It asks you to accept slower ramps, lower headline numbers, holdings better suited to long-term ownership than short-term hold, and a level of local involvement that a purely financial operator will find tedious. You must be willing to be a storage operator in a particular place, not just the owner of an asset class. That means showing up when a unit floods, knowing which contractor to call, and treating a customer complaint as something that reaches your name, not a ticket in a queue three states away.

But for anyone willing to do that work, these communities offer two things that are getting harder to find anywhere else in this business: room to build something durable and the ability to serve a real need without fighting a giant for every customer. The big operators are not wrong to skip these markets. They are simply leaving room for operators willing to show up.