By Ralph Bivins
Houston Chronicle Tuesday, Dec. 8, 1998

In A.D. 10,000, when archaeologists view the ruins of Houston, what will they think when they stumble across the self-storage miniwarehouse?

What are these buildings that appear to be multilevel honeycombs of closets and storage-rooms about the size of a one-car garage?

Why were these Houstonians so over-supplied with material possessions that they needed their own little warehouses to store their stuff?

And why was there such a tremendous construction boom of self-storage facilities in Houston in the late 1990s?

“We’ve never had more properties built in one year,” said realty broker Aaron Swerdlin of CB Richard Ellis.

 At least 21 self-storage miniwarehouses, totaling 1.1 million square feet of space, will be built in Houston in 1999, said Swerdlin, who has been tracking the self-storage industry closely for several years.

During the decade of the 1990s, the number of miniwarehouse facilities in Houston has risen from 311 to 443 properties – an increase of more than 40 percent.

According to CB Richard Ellis, the city-wide occupancy of miniwarehouses is 84.3 percent.

Part of the reason for the expansion in the business is a growing demand from consumers and small businesses, said local miniwarehouse developer Peter Morris, president of BullsEye Self Storage.

Another reason is that self-storage warehouses have improved in recent years, adding increased security, air-conditioned storage areas, elevators, security cameras with 24-hour videotaping, and security gates with access codes, Morris said.

Unlike what may have occurred in years past, the improvements have assured the customers that their goods probably won’t be stolen or damaged, Morris said.

In addition, Houston has been experiencing a surge of apartment construction over the last year, Morris said.  And apartment dwellers are big users of ministorage warehouses.

Houstonian Jan Hirst found a big need for a self-storage facility this summer while her town home was undergoing extensive remodeling.

“We had to store all our furniture and everything,” said Hirst, who was spending about $500 per month for two large storage units at the Stor-It on Washington Avenue.

The remodeling is complete, but Hirst is still paying $60 per month to rent a smaller unit for some household odds and ends.

Corporations that allow employees to work out of their homes also have contributed to the ministorage surge, said self-storage developer Ricky Jenkins of the Jenkins Organization of Houston.  Pharmaceutical sales people, for example, work out of their home and store their drug samples in miniwarehouses.

As Houston’s office-space costs have risen, small businesses have become big customers at miniwarehouses because it costs a lot less to keep files at such a facility than inside an office building.

“It’s a lot less expensive than my office space,” said James Wallis, an attorney with Moriarity, Madigan and Wallis.

Wallis said his firm handles numerous lawsuits dealing with medical malpractice, personal injury and product liability.  The firm usually keeps its legal documents for five or 10 years.  Keeping the papers in storage is cheaper than transferring them to microfilm, Wallis said.

Lease rates vary.  But in desirable locations, a 10- by 10-foot storage space without air conditioning can be obtained for $200 per month.  A 5- by 5-foot locker with a low ceiling typically goes for $35 to $50 monthly.

Another recent wrinkle in the mini-warehouse business is the emergence of national brand names, said Andrew Shipman, an industry analyst at Morgan Keegan & Co. in Memphis, Tenn.

Huge publicly traded companies, such as Storage USA, Public Storage and Shurgard Storage, have been making a big imprint on the market, edging out the small mom-and-pop firms, Shipman said.  Customers feel a little more secure storing their files, furniture or finery.

Until recently, the public companies have been on a rampage, rapidly buying existing storage facilities or building their own, Shipman said.  But the downturn in the stock market last summer deflated the buying binge, Shipman said.

“I think the rapid expansion is gone – for a little while anyway,” he said.

The publicly traded storage companies are real estate investment trusts or REITs.  A REIT is similar to a mutual fund, except that instead of owning a portfolio of stocks and bonds, it owns a variety of real estate.  Under law, a REIT is allowed to avoid paying corporate income tax by distributing 95 percent of its income to its shareholders.

In the past two years, as REITs were flying high, they were able to easily finance their purchases of miniwarehouses.  The companies were eager to grow and grab a share of the market.  But REITs, along with other public companies, suffered big declines in their market prices in the last half of 1998, and their ability to buy more properties has been reduced, Shipman said.

But the REIT money played a significant role while it lasted.  Around the nation, between 1994 and 1998, REITs bought more than $2 billion worth of ministorage facilities, according to Swerdlin.

In Houston, the presence of REITs in the ministorage business has mushroomed.  Storage Trust, for example, had two ministorage facilities in Houston in 1994.  It now has 17, Swerdlin said.  Over the same period, Shurgard has gone from six outlets to 14. 

But Louise Stewart, spokeswoman for Storage USA, a REIT based in Memphis, said the market is not overbuilt.  The company recently opened self-storage facilities in Webster and in Pasadena and it has another one under construction on the Southwest Freeway. 

“Everybody appears to be doing well,” Stewart said. 

Earlier this year, REITs were buying the properties as soon as they were completed.  Now, REITs won’t buy them until they have a lot of units leased, Swerdlin said. 

Morris of BullsEye Self Storage believes that the miniwarehouse market could be overbuilt locally, particularly in the Inner Loop, where four new projects have broken ground since August.   

But Swerdlin points out that Inner Loop apartment construction is exceptionally heavy and demand should absorb most of the excesses in mini-storage.

And the demand for self-storage seems to expand as consumers continue to get exposed to it, said Dan Miller, a CB Richard Ellis broker who has analyzed and sold a large number of facilities.

Self-storage facilities today, similar to cellular phones, have grown from being an accessory to a necessity, Miller said.