Ancillary Income

As self storage specialists I’m assuming you already have the knowledge and skills needed in order to maximize space fees, and are putting this into practice or at least passing this skill onto staff. Noticeably though quite a few facility owners are not maximizing the opportunities available to increase their second cash stream – ancillary income. Income streams other than lease paying storers can comprise up to 8 percent of your total revenue. David Blackwell, of Blackwell consulting says: “Anywhere between 4 and 8 percent of total revenue can come from other items. It depends on how hard the operators drive their business or the use of their site”.

These other items that David mentions above include sale of merchandise (such as boxes, bubble wrap, packaging, tape, rope and locks), insurance for stored goods, telecommunications, signage or advertising space and late payment fees. So lets look closer at two of the above money earners in greater detail; Communications towers and billboard/signage advertising. There are two main reasons that self storage facilities are great for these types of money earners. Firstly, self storage facilities tend to be in prominent locations (whether it’s fronting or backing) on main streets or highways. These prominent positions are great locations for outdoor or billboard advertising. Secondly, the facilities are of passive use and because of this, tend to be suitable for telecommunications – either an antenna placed on a building or tower erected on the land.

Communications Towers
Self storage sites also have the ability to be available for telecommunications towers and other utilities because of the facilities passive use. A tower can hose more than one carrier, thus the ability to gain several leases from the one site is a real one and it’s not usual for site or land owners to make between $20 000 and $30 000 per year from rental. How can you get a communications tower on your property and start receiving money?

Perhaps the easier way to address this question would be better understood by asking a similar one, ‘how can I get a McDonald’s on my site?’ Both McDonald’s and Towers are everywhere, both sometimes lease land, and both pay very good lease rates. But, most landowners understand that McDonald’s build their locations where they are going to sell as many hamburgers as possible. They build in high traffic locations, along busy highways and in the middle of small towns. They don’t build within a few miles of an existing location unless there is enough foot or driving traffic to support each location fully. McDonald’s can also only build where the local council and planning office allows them to build, typically in commercial zone areas.

Property candidates will almost always be one of the following types:
– Raw land or vacant location
– Co-location (an existing tower that has space for additional antennas)
– Existing structure such as buildings or water towers.

That being said, there are certain factors that may make your site a more likely candidate.
1. Distance to adjacent towers. If there is an adjacent communications tower within a certain distance to your location chances are not good that another will be built. The local zoning jurisdiction is that existing towers will be utilised first.

2. Dense population or high traffic counts. Your site is surrounded by either an urban or suburban population or alternatively nearby roadways of highways that have high traffic counts.

3. Zoning. This is where zoning or land use come in. The likelihood of your site being useful to communications companies increases if you are within an industrial parcel, surrounded by residential property, keeping into account point 1.

Communications companies such as Telstra and Optus are companies that exist to make a profit. Thus these companies position their towers for essentially two reasons:
1. To provide coverage in areas where customers will use it.
2. To provide coverage where customers travel between those areas.

McDonald’s for example don’t build in areas where it is not profitable. Nor do they build where there is an existing restaurant. Where the McDonald’s analogy fails is that they will build where their competitor has built. You often see a McDonald’s next door to a KFC. There is a however, a difference with towers; communication companies do not often build towers next to existing towers. There are a couple of reasons for this. The main one being that a tower is much like a shopping centre in that it can accommodate multiple companies.

For every one of these communications sites, someone will be compensate for use of the land or structure upon which it sits. Yes, there are some pitfalls. But with careful planning and lease negotiations, their effects can be minimized or avoided all together. Anyone considering making major changes to their property in the next decade or so, such as redeveloping, selling or changing land use, will want to think long and hard about whether they want a comms tower on their property. While a long-term contract can pay well, it is quite difficult to change.

People who shouldn’t contemplate this would be those that are not sure what their long-term plans are for the site, as you wouldn’t want a communications tower on a long-term lease to come in between a major development. For some a negotiation buster is the fact that communications carriers need 24hr access to their equipment. This can prove to be a problem for sites that have off-site management or those that lock-down during non-business hours.

Outdoor & Billboard Advertising
Billboard or signage rents that site owners can collect from other advertisers can range between $10 000 per annum for a modest highway sign up to $80 000 per annum for a prominent strategically placed billboard. The sign or billboard may be a free-standing erection or the use of the side or back of your existing structure or building. Outdoor or billboard advertising is an important communication medium for businesses, government and the not-for-profit sector. It can exist on road sides, around airports and other transport hubs, on public transport, within retail environments or fixed against buildings and warehouses in prominent positions.

As already mentioned, leasing out billboard or advertising space to another can prove to be quite profitable, with very little effort. You may be asking, ‘why should I lease out perfectly good advertising space that I could use myself?’ Your site may already be adequately advertised through signage. Majority of main road or well positioned facilities take advantage of the structure itself and sign write branding and the business name on the building along with other well placed signs around the site.

Billboards or outdoor media consists both of a structure and the advertisement (interchangeable) that appears on it. The mediums approval process is regulated by local councils and authorities. Most outdoor displays require local council approval. The nature of these approvals depend on the size and location of the structure and sometimes more than one approval may be necessary. Legislation often prescribes when and what approvals are required and from what body such approval must be sought. Legislation varies from state to state (and territory). Advice must always be obtained from the relevant local authority, such as local council or state and territory government.

Big business is constantly looking for the right advertising medium to target their demographic and are increasingly acknowledging the effectiveness and reach potential of outdoor advertising. Outdoor advertising has been growing steadily and together with on-line, has been identified by industry analysts as offering the greatest growth potential. In today’s busy and fast paced life, outdoor advertising is perfect for people on the go. Increasingly people are spending less time at home, and as a result are less exposed to traditional media like TV, newspapers and magazines. Big advertisers know this – they are aware of the research and are looking for sites where they can advertise their message.

If you have a facility that backs or fronts onto a a main road or is within a high traffic area it may be well worth your time investigating the activities raised above as you may be a candidate for earning further ancillary income with very little ongoing effort. If you want to increase your income remember this line. You need to ask yourself and your customers; what else can you do? What else do they need? What else will your market benefit from?

David-Blackwell
David Blackwell
Urbis

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