By Meghan Hall
Despite its growth in recent years, the self-storage industry has seen next to no innovation, even as proptech has infused itself into the rest of the commercial real estate industry. Neighbor, a tech-based peer-to-peer self-storage company is rapidly expanding as it provides customers with a new way to approach the industry. The Registry spoke with Neighbor’s CEO and Co-Founder, Joseph Woodbury, on how the self-storage industry has failed to keep pace with demand, and how Neighbor is modernizing the asset class and providing users with the ability to generate a passive income.
What is your current perception of the self-storage industry, and how did this lead to the founding and creation of Neighbor?
Neighbor operates in an industry that hasn’t seen meaningful innovation in over 50 years. And yet, the $40 billion self-storage industry is massive. As of today, there are more storage facilities in the United States than McDonald’s, Starbucks, Burger Kings, Dunkin’ Donuts, Domino’s Pizzas, Walmarts, Home Depots, and Costcos combined. And despite having so much storage space in the United States, [supply] is over 93 percent occupied nationwide.
Since there is so much more demand for self-storage than there is space in storage facilities, the quality of service provided to customers in order to fill their spaces has suffered. Yet still, consumers have no choice but to use them anyways.
After searching for an affordable and short-term solution for storing his furniture over the summer, my co-founder and then college student, Preston Alder, was appalled at current options on the market. Preston brought Colton Gardner and me together, and we heavily researched the storage industry. From there, Neighbor was born, based on the top five things consumers care about: price, convenience, security, insurance and technology.
● Price: Our storage is half the price of a traditional self-storage unit
● Convenience: The average travel time to a traditional self-storage facility is 30-45 minutes. Our storage is conveniently located right next door in your neighborhood.
● Security: According to FBI statistics, residential neighborhoods are 6 times safer than a traditional self-storage unit. (self-storage facilities sadly have very high break-in rates).
● Insurance: We are the first storage provider in the country to provide our renters with $25,000 in insurance for everything they store on our platform, completely free. Most traditional self-storage providers don’t offer any insurance.
● Technology: Millennials are the fastest growing cohort in the self-storage industry. Yet the largest storage companies (trading on the NYSE for tens of billions of dollars) have not catered to this demographic or seen the potential for growth there, many of them don’t even have mobile apps for their younger customers to use. Neighbor is the #1 ranked self-storage app in Apple’s App Store in the U.S..
Neighbor markets itself as a “self-storage market disruptor.” How would you define this phrase and what it means to shake up the self-storage industry?
Over the past 50 years, the $4 billion self-storage industry has seen little to no innovation. 85 percent of self-storage centers across the country are mom-and-pop operations relying on outdated systems and handling little-to-no turnover. While Extra Space, Cube Smart and Life Storage have built a national footprint, their business model is still the same – inconvenient location, dusty/old storage space, insanely high price, minimal security and no insurance for renters. As a technology-driven brand, Neighbor has launched a peer-to-peer marketplace (akin to Airbnb, Uber, Instacart) to match property owners who have extra space with renters looking to store items. By unlocking storage space square footage in people’s homes and even commercial properties that would otherwise cost a self-storage company billions of dollars to build, Neighbor is quickly addressing the demand for storage (especially in light of the pandemic) with an eco-friendly solution. As a result, Neighbor is disrupting both the self-storage industry and the gig-economy.
Why do you think self-storage demand has skyrocketed in recent years? Why do you believe that supply has failed to keep pace?
Self-storage has and always will be an essential business. It is human nature to hold onto items, and often there isn’t enough room in our homes to store everything we’d like to. While the storage industry has remained the fastest growing segment for commercial real estate over the past four decades, the demand for storage in 2020 skyrocketed as people’s relationship with space changed. Whether seeking temporary solutions for those relocating or homeowners needing to make extra space for an office or gym, self-storage granted people to move about the country or fully utilize every inch of their home.
Due to the size of self-storage centers, lack of open land in major metropolitan areas – who need storage the most – and the costly investment to build new infrastructure, it is a challenge to increase the supply. In fact, some cities have even initiated a temporary ban on self-storage construction. And while self-storage REITs fall far short each year, it’s not for lack of trying. The storage industry spends about $5 billion annually just on construction of new facilities. But it’s not enough.
How does Neighbor work? What are some of the benefits to using a platform such as Neighbor?
Similar to Airbnb and Uber, Neighbor.com operates online and as an app. For property owners, it is super simple to upload photos of your garage, driveway, basement or closet and use Neighbor’s suggested pricing model to list their units. In turn, renters can browse available units within their neighborhood, move-in within 24-hours and pay their “rent” through the Neighbor platform. Because Neighbor facilitates all payments, 100 percent of the desired rent will go to the host, while Neighbor earns its portion by tacking on a small percentage to the rent charged to the renter by the host.
On Neighbor, we are empowering users with completely passive, predictable monthly income. As soon as a renter stores their items in the space, the host will often not need to do any work for years at a time beyond letting the renter access the space every six months or so. This model allows users to earn sharing economy income without altering their primary jobs or lifestyles at all.
How do Neighbor’s rates/safety/efficiency compare to those of traditional storage units?
Neighbor is approximately 40 to 50 percent cheaper than traditional self-storage. With units as low as $10, our pricing model ensures our customers are paying a fair price, that is typically below market value.
How does Neighbor ensure the safety and security of both tenants and hosts?
Neighbor is invested in the safety of our hosts and renters. We offer scam protection, secure automatic payments, safe messaging as well as a $1 million dollar host guarantee and a $25,000 renter guarantee unprecedented in the industry.
Neighbor has experienced a 700 percent increase in organic traffic and reservations since 2019 and therefore has added a number of new features to its platform to accommodate its growth. What features has Neighbor added, and how will this help the platform to become more efficient and effective?
In recent months, Neighbor has launched a new Quick Move-In feature to listings. For hosts interested in taking advantage of this feature, a confirmed renter will be able to move-in within 24 hours of booking the space, adding flexibility and ease to the booking process.
What are Neighbor’s future plans for growth? Are there any markets that the platform will target next? If so, why are these markets on your radar?
Neighbor already operates in all 50 states and grew organic traffic to the site by over 7X year over year from 2019 to 2020. Traction isn’t limited to one type of area – we’ve seen incredible interest in both acquiring storage and renting out underutilized space across urban cities, rural areas and suburbs. Everyone needs more space, particularly in a pandemic where people’s houses are often their offices, schools, restaurants, movie theaters and gyms! To create more storage options, we’ve also launched some unexpected partnerships.
For example, in cities and places where commercial vacancies are at record highs, we’ve partnered with commercial landlords to make that “underleased” space available for renters. This year, we’re continuing to identify more types of partnerships that fit along those lines – which people, organizations and businesses have extra space they want to monetize. We’re having vibrant conversations with all types of businesses and landowners. This is in addition to the rapid expansion we’ve had in residential users, whether they have extra space in their garage, unused bedroom parking lot or yard.
Looking ahead to the next 12-24 months, how do you see the self-storage market evolving? Why?
2020 changed everyone’s perception of space. People relocated or cleared out rooms in their current homes in search of more space. The longing for more room and less clutter isn’t something we anticipate will change when the pandemic ends. We believe self-storage will continue to be a highly demanded business in the next 12-24 months, just as the industry has trended upward for the last 40 years.
That said, what is likely to change in the next few years is how self-storage owners and operators think about expanding their businesses. With limited land availability (especially in high density areas) adding more supply to the market will challenge the industry to rethink how they use their own space. Perhaps there is an opportunity to reconfigure units because 5×10 or 10x 20 spaces are in greater demand than 20x30s. With commercial landlords struggling to fill vacant buildings for traditional office or hospitality tenants, maybe they turn to the self-storage industry to repurpose the space. The solution isn’t to build more storage, it is to rethink how we work within the industry’s current footprint to create a more purposeful and eco-friendly future.
Is there anything else you would like to add, or anything that we should be asking?
At Neighbor, we are not only disrupting the self-storage industry, but also the sharing economy. For too long the gig economy has only been accessible to those who are able to put in many hours driving for DoorDash or Uber or to those wealthy enough to own a second property that can be listed on Airbnb. Neighbor unlocks the opportunity of passive sharing economy income to everyday Americans who simply have extra space in their attic, basement, garage or driveway. And since Neighbor’s payouts are recurring every month, they become income that Neighbor hosts can count on to pay their bills, without requiring time away from their principal occupation. It’s the future of the sharing economy.