PropTech Revolutionizing Self-Storage Acquisitions and Operations

Author: Steven Vrablic, Senior Acquisitions Analyst

Executive Summary

PropTech is revolutionizing the self-storage industry, transforming acquisitions, development, and operations. The strategic adoption of these technologies is becoming crucial for investors to unlock untapped value, gain a competitive edge, and deliver superior risk-adjusted returns in an evolving market landscape.

Key topics covered:

• AI-driven acquisition and underwriting processes
• VR applications in design, emphasizing conversion opportunities
• IoT and AI enhancements in self-storage operations
• Impact of PropTech on cost efficiency and investment returns
• The future of data-driven, customer-centric solutions in self-storage

I. Introduction: Self-Storage - A Magnet for Institutional Capital

The self-storage sector has firmly established itself as a cornerstone of commercial real estate portfolios, consistently delivering robust and recession-resilient returns that outpace many traditional asset lasses ^[1]. This exceptional performance has attracted a surge of institutional capital, with private equity firms, REITs, and pension funds aggressively increasing their allocations to self-storage, seeking stable cashflows and long-term appreciation ^[2]. This robust investor interest is represented in the following chart, highlighting the significant acquisitions of newly built self-storage properties by major institutional players and private equity firms within the sector.

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Driving this investor confidence are powerful, enduring demand drivers:

• continued urbanization compressing living spaces,
• evolving lifestyle trends emphasizing flexibility and mobility,
• the continuation of hybrid work models,
• the relentless growth of e-commerce fueling inventory storage needs.

These secular trends strongly suggest continued consumer demand, making self-storage a compelling investment for sustained growth and capital deployment [4]. However, in this increasingly competitive landscape, simply participating in the self-storage boom will not be sufficient for outperformance. To maximize returns, forward-thinking developers and operators are exploring Property Technology (PropTech). For self-storage firms aiming to lead and deliver superior investor returns, PropTech – encompassing AI acquisitions, VR conversions, and IoT operations – is an essential catalyst. This essay will explore how strategic PropTech adoption is key to unlocking untapped value and establishing a competitive edge, with a particular focus on self-storage conversion opportunities.

II. Intelligent Acquisitions: The Power of AI

Traditional self-storage acquisition strategies, often limited by manual processes and subjective valuations, are increasingly challenged to capture optimal opportunities in today’s dynamic market. These legacy approaches can be inherently slow, lacking the scope and analytical power to effectively process complex datasets needed for informed decisions. Artificial Intelligence (AI) is emerging as a game-changer, injecting unprecedented speed, scale, and data-driven intelligence into acquisitions, ultimately to enhance underwriting precision and efficiency. This represents a significant advancement over traditional methods, which often rely on time-consuming manual analysis and financial models constructed in Excel. Leveraging AI for rapid analysis of diverse data, the primary goal is to achieve quicker, more confident investment decisions based on a comprehensive understanding of asset value and market dynamics. To illustrate this evolution, the following section will explore specific PropTech use cases and companies actively refining the self-storage acquisition process with AI, showcasing both current applications and areas for continued advancement.

A significant advantage of AI in self-storage acquisitions lies in its capacity for efficient collection and rapid analysis of publicly available data, including the detailed performance disclosures of self-storage REITs. Industry leaders such as Public Storage, Extra Space Storage, CubeSmart, and National Storage Affiliates provide a wealth of quarterly financial information, including within their supplemental financials. This data is invaluable, especially to smaller developers and operators, offering granular insights into same-store revenue and expense trends on both a QoQ and YoY basis, as well as significant perspectives on development and expansion costs. AI-powered tools can systematically ingest and process these supplemental financials across all four REITs far more efficiently than traditional manual methods.  This streamlined analysis allows acquisition teams to quickly identify key performance benchmarks and spot emerging same-store performance trends, enabling them to further analyze promising markets for investment. With these public companies representing nearly 10,000 managed and owned facilities as data points, acquisition teams can develop a more nuanced understanding, including of development cost structures across different markets. Furthermore, AI analysis extends beyond REIT data in isolation. These platforms can integrate the public companies financial insights with data from reputable industry sources such as the Self-Storage Almanac, Yardi, Inside Self-Storage, and the Self-Storage Association. By synthesizing this wide range of data, AI delivers a comprehensive, data-driven understanding of key market factors, ultimately leading to more informed and strategic acquisition decisions.

PropRise: AI-Powered Data Platform for Self-Storage

Spearheading this transformative shift are innovative startups, purpose-built to enhance commercial real estate investment through AI. PropRise is seeking to provide a comprehensive AI-powered data platform specifically designed for commercial real estate investors, including those focused on self-storage. Its potential power lies in its ability to crawl and synthesize massive datasets – market demographics, real-time supply and demand trends, complex zoning regulations, and granular property-level details – creating a holistic, dynamic market view previously difficult to achieve.

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For self-storage investors, PropRise aims to deliver actionable insights that translate to enhanced returns for both on-market and off-market opportunities. The all-in-one platform is designed to excel at identifying supply and demand imbalances – pinpointing underserved markets, showcasing upcoming development projects, while ultimately signaling prime acquisition and development opportunities with less competitive pressure and higher potential for rental rate growth [8]. It rapidly assesses zoning ordinances with accuracy, identifying properties with favorable zoning for self-storage, streamlining a rapid first-pass zoning assessment and reducing costly surprises down the line. Consequently, PropRise directly assists in alleviating a major bottleneck in acquisitions – the efficient sourcing of promising deals, by intelligently automating traditionally manual and tedious analytical processes.

Henry.ai: Streamlining Transaction Workflows with AI

Henry.ai directly addresses the need for speed and efficiency in the transaction process itself, exploring leveraging AI to streamline critical workflows that traditionally consume significant time and resources, such as loan approvals. While initially recognized for its rapid Broker Opinions of Value, Henry.ai’s platform now offers a suite of AI-powered tools designed to accelerate and standardize key acquisition processes. For investors, this translates to faster deal cycles and increased deal flow capacity. The startup automates investor memo creation for consistent, professional, and rapid communication, keeping investors informed and engaged in competitive deals.

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This speed and clarity are critical for maintaining investor confidence and securing funding for acquisitions. Moreover, the AI-assisted compilation of loan packages is being explored to potentially reduce the administrative burden of securing financing. By automating the organization and presentation of complex financial and property data required by lenders, Henry.ai aims to accelerate loan approvals.

Read.ai: AI for Process Optimization and Enhanced Decision-Making

To optimize development and enhance workflow efficiency, AI-powered tools are being explored for streamlining traditionally time-consuming tasks. For example, Read.ai is developing technology that analyzes meeting transcripts to provide actionable insights, aiming to transform lengthy and unstructured discussions into more focused and data-driven recommendations. For key decision makers, this type of AI-powered assistance potentially translates to a more efficient acquisition process overall, leading to quicker and more informed decision-making, effectively supplementing the acquisition team with feedback and analytical perspectives. Tools like Read.ai are being developed to automate tasks such as generating summaries, highlighting key discussion points, and tracking action items – all of which can lessen the administrative burden on individuals involved in the acquisition process.

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While the specific functionalities of tools like Read.ai are valuable, the broader benefit lies in how this type of AI-driven assistance can free up professionals to focus on higher-level strategic thinking and analysis. This can lead to the identification of potential efficiencies, improved communication, and a more streamlined and data-informed approach to acquisitions, ultimately enhancing decision-making quality and speed. It remains critical to underscore that the true value of these AI tools is realized when they are used to augment, not replace, the essential expertise and judgment of human professionals in real estate.

Section Summary

Before exploring the next PropTech advancement, it’s important to summarize how Artificial Intelligence is revolutionizing self-storage acquisitions:

• Enhanced Market Insights (PropRise): Swiftly assesses vast datasets for superior market understanding and optimal target identification.
• Streamlined Transactions (Henry.ai): Automates workflows, accelerating deal cycles and reducing administrative burdens.
• Process Optimization (Read.ai): Assists with process improvement, idea generation, and better organization throughout acquisition workflows.
• Data-Driven Analytics: Synthesizes diverse data (REIT financials, industry sources) for more informed and predictive analytics.
• Empowered Decision-Making: Ultimately provides principals with enhanced data-driven decision-making for more efficient and profitable acquisitions.

Ultimately, the integration of these AI-powered tools empowers stakeholders with enhanced decision-making capabilities and the potential for superior acquisition outcomes.

III. Visualizing and Optimizing Conversions with VR for Enhanced Project Success

Self-storage conversions represent a compelling investment strategy, offering accelerated speed to market, potential cost advantages, and access to prime infill locations [16, 17]. However, unlocking the full potential of conversions demands overcoming inherent complexities: assessing building suitability, navigating intricate design adaptations, and ensuring efficient construction execution. Virtual Reality (VR) is emerging as a key PropTech tool, transforming conversion projects from conception to completion and directly contributing to enhanced project success and investor value.

VR is changing the preconstruction and construction phases by delivering three-dimensional visualizations of proposed conversion designs. Investors, developers, architects, and General Contractors (GCs) can now virtually “walk through” a proposed self-storage facility, experiencing the spatial layout, unit configurations, and design aesthetics in a fully immersive environment, long before physical construction commences. This level of visualization is fostering enhanced collaboration and communication across project teams. GCs are leveraging VR models to conduct virtual walkthroughs, identifying constructability challenges, design inefficiencies, or potential system clashes (MEP and structural) in the digital realm, allowing for proactive problem-solving and design optimization before costly on-site issues arise.

For development firms, this enhanced visualization can translate directly to increased confidence during the critical due diligence period prior to closing on a property and reduce overall project risk throughout the construction process. By virtually experiencing the converted facility before significant capital is deployed, development and acquisition teams may gain a far clearer understanding of space utilization, unit mix efficiency, and overall design functionality, potentially enabling a more accurate and preliminary assessment of revenue potential and leading to more robust and reliable underwriting earlier in the acquisition process. For example, during due diligence on a potential warehouse conversion, VR walkthroughs can immediately reveal challenges such as constricting column spacing that might limit unit mix configurations, or unforeseen structural elements that could impede efficient build-out.

Optimizing design, proactively mitigating construction risks identified during due diligence, and enhancing team collaboration through VR are all ways that can significantly assist with efficiency throughout the entire development process – starting with a more informed and streamlined due diligence effort. This is particularly amplified when vertically integrated firms or those closely aligned with their GC leverage VR as a central communication and planning tool, fostering collaboration between acquisition, design, engineering, and construction teams from the initial stages of project evaluation. By identifying potential difficulties and optimizing designs earlier through enhanced VR-driven due diligence, development firms can make more informed acquisition decisions, potentially avoid costly surprises down the line, and ultimately achieve more successful and higher-value conversions.

IV. PropTech for Operational Excellence in Self-Storage

In the operational phase of self-storage, maximizing efficiency and tenant satisfaction are paramount for driving long-term value and outperforming the competition. PropTech solutions, specifically IoT-enhanced security systems and AI-powered chatbots, are increasingly improving self-storage operations, delivering demonstrable cost savings, enhanced tenant experiences, and ultimately, improved asset performance. Recent insights from industry leaders like Public Storage suggest these technologies are not just theoretical improvements but are showing tangible impacts on operations and customer interaction.

Operational Value of Internet of Things Technology

IoT-enhanced smart security elevates self-storage security to a new level of proactive, intelligent protection, moving far beyond traditional and reactive security measures that are no longer adequate. Interconnected systems integrating smart locks, mobile access control, and real-time video surveillance are creating more robust, responsive security ecosystems that benefit investors through multiple avenues. As the 2024 Self-Storage Almanac states, “Investing in equipment that provides layers of security and numerous fail-safes is critical for any self-storage operation”. As the Almanac emphasizes, a layered security strategy, incorporating keypads, zone control, motion-sensitive lights and cameras, door alarms, and smart locks, is becoming critical for any self-storage operation.^[24]

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For investors, the ROI of increased security is compelling. Insurance providers recognize the demonstrable risk reduction offered by these advanced systems, translating to lower insurance premiums for well-protected facilities. The proactive security and real-time monitoring inherent in IoT systems aim to minimize theft and unauthorized access incidents, directly protecting tenant assets and reducing potential liabilities – a key factor for investor risk mitigation.

Furthermore, in today’s tenant-centric market, enhanced security is becoming a powerful differentiator. Prospective tenants often prioritize safety and security when choosing a storage facility, with recent industry surveys highlighting security as a top-of-mind concern for renters. Facilities exploring and implementing visible, state-of-the-art security systems may gain a competitive advantage, attracting security-conscious tenants, potentially driving higher occupancy rates, and justifying premium rental rates –boosting revenues and asset value. Ultimately, the lower risk profile and enhanced operational metrics associated with IoT security may make self-storage assets more attractive to potential buyers, increasing exit valuations and maximizing investor returns.

Streamlining Operations with AI: The Power of Automation for Cost Savings

AI-powered chatbots are also being implemented to improve tenant support, potentially providing instant, 24/7 customer service that enhances tenant satisfaction and drives significant operational cost efficiencies. Deploying AI chatbots across digital touchpoints – websites, mobile apps, and messaging platforms – provides tenants with immediate access to support anytime, anywhere, answering routine inquiries, providing facility information, and guiding them seamlessly through the rental and payment processes. For investors, this potentially translates to both enhanced tenant retention and streamlined operations. In line with evolving customer expectations in a growing market, the always-on availability and instant responsiveness of chatbots can dramatically improve tenant experience, fostering loyalty, positive online reviews, and stronger tenant referrals. Chatbots are capable of handling a significant volume of common inquiries, potentially reducing call center traffic and associated staffing costs. Similarly, chatbots may alleviate administrative burdens for on-site and district managers, freeing up their time to focus on strategic priorities, proactive facility management, and addressing more complex tenant needs that require human intervention.

Joe Russell, CEO of Public Storage, emphasized the real-world impact of such digital transformation in the company’s most recent quarterly call, stating, “Our digital transformation is advancing and further connecting all aspects of our business. Adoption by customers has been particularly swift with self-selected digital options now comprising 85% of our customer interaction and transactions, a significant increase from around 30% in 2019.” This high adoption rate of digital options underscores the increasing tenant comfort and preference for digital self-service. Furthermore, Russell highlighted the efficiency gains, noting, “As a result, we've reduced on property labor hours by nearly 30% and there's more to go. Importantly, we are doing so while also driving satisfaction higher among our customers and the 6,000-member property operations team.” The following chart illustrates Public Storage's same-store on-site payroll trends from 2020 through 2024, showcasing efficiency gains in payroll per store despite overall wage increases and store count growth.

Although full industry optimization is an ongoing process, the compelling evidence from an industry leader, combined with increasing adoption rates, signals that PropTech is not merely promising, but is demonstrably transforming self-storage operations and setting a new standard for efficiency and customer-centric service.

V. Conclusion: PropTech – The Catalyst for Self-Storage Investment Outperformance

Powering intelligent acquisition strategies with AI, PropTech is no longer a niche in self-storage, but a core driver of industry evolution. PropTech is increasingly moving beyond a niche innovation in self-storage; it is evolving into a fundamental force shaping the industry’s future growth and investor outperformance. From AI-powered acquisition engines unlocking intelligent deal flow to VR-optimized conversions de-risking development and IoT-enhanced operations maximizing efficiency, technology is impacting various aspects of the self-storage value chain. For investors seeking superior risk-adjusted returns in a competitive market, strategically exploring and embracing PropTech is becoming increasingly advisable. By thoughtfully leveraging these developing technologies, self-storage firms can potentially unlock untapped value, optimize operations, and deliver stronger performance, positioning themselves to potentially lead in the ongoing PropTech-driven evolution of this compelling and increasingly institutional asset class. The future trajectory of self-storage investment success is likely to be increasingly intelligent, data-driven, customer-centric, and influenced by strategic PropTech adoption.

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