A space-sharing startup is seeking to disrupt the old-school self-storage industry with a digitally focused, peer-to-peer platform connecting hosts with renters who need a place to stash their stuff.
Following in the footsteps of successful peer-to-peer marketplaces such as Airbnb and Uber, Neighbor allows people and businesses to earn income by renting out their excess space — basements, garages, attics, spare bedrooms, closets, vacant offices, etc. — as storage units for others in their communities.
The company was founded in 2017 and now has a presence in all 50 states. The pandemic accelerated the need for storage space in 2020, and Neighbor saw its traffic and reservations surge by more than seven times over 2019 levels.
“On both sides, the pandemic has been kind of a boon to our business,” said Joseph Woodbury, CEO and co-founder of Neighbor, which is based in Salt Lake City.
With many workers moving out of large urban areas, and others clearing space to create home offices, the pandemic has increased the demand for storage, he said. On the other side of the coin, as unemployment has risen, people have found that renting out their excess space can bring in additional income — anywhere from $10 per month for part of a bedroom closet to thousands of dollars for larger commercial spaces. Commercial property owners across a range of industries have also been using Neighbor to rent out their offices, restaurant dining rooms, gyms and other spaces.
The fastest-growing cohort in the storage community is millennials, and they want something they can do in one, two or three clicks.
Joseph Woodbury, CEO and co-founder, Neighbor
Relocations and household shifts heat up $39.5 billion self-storage industry
The self-storage industry generated $39.5 billion in revenues in 2019, according to IBISWorld. That represented an increase of 3.6% over the prior year, and a rise of nearly 50% since 2010.
Marcus & Millichap, real estate investment services firm, predicts that economic pressures could drive more demand for self-storage in the near term.
“As more people move in with family or friends to reduce living expenses, the household consolidation should increase storage needs,” wrote Steven D. Weinstock, first vice president and national director, self-storage division, in a recent Marcus & Millichap report. “Other pandemic-motivated relocations may create demand as well. Months of sequestration are propelling some people to migrate to larger living spaces in lower-cost neighborhoods or metros. As changing residences is a major driver of self-storage use normally, this trend could bode well for storage properties in popular relocation destinations, including much of the Sunbelt.”
Unlike the vast majority of companies in the self-storage industry, Neighbor does not build any storage facilities itself. Instead, it relies on hosts to list their available spaces, which can then be searched by renters seeking to store their items.
Hosts seeking to list their available space on Neighbor must complete a lengthy questionnaire that includes identity verification. Neighbor also helps them set a price by offering suggestions based on the size of the actual space and the overall market conditions, then adds its own fee on top of the price that the hosts ask for. The total cost including both the fee and the asking price is then displayed to renters.
Neighbor seeks to price its storage units at about half the price of traditional storage facilities in the market. It also insures stored property for up to $25,000.
“When we started, we wanted to create a service that was better in every single way— price, insurance, convenience, distance — we wanted to be better on all of those [fronts],” said Woodbury.
One way Neighbor has sought to distinguish itself is by providing a quick-and-easy, user-friendly digital experience.
“The fastest-growing cohort in the storage community is millennials, and they want something they can do in one, two or three clicks,” said Woodbury, who said Neighbor has the No. 1 app in the self-storage space.
Tapping eBay and OpenTable veterans — plus $10 million in funding — to ramp up growth
In January, Neighbor closed a $10 million Series A funding round led by Silicon Valley venture capital firm Andreessen Horowitz. The funding has two main purposes, according to Woodbury. First, it supplies growth capital to fuel the company’s expansion. Second, it gives the company access to business veterans from the marketplace sector who can help guide the brand as it continues to ramp up growth.
Jeff Jordan, a partner at Andreessen Horowitz who held leadership positions at peer-to-peer retail marketplace eBay and at restaurant reservations system OpenTable, joined the board of Neighbor as a result of the investment.
“He’s widely known as one of the best marketplace investors in the world,” said Woodbury. “He’s been an excellent addition, and has been helping guide us on this growth path.”
Neighbor also brought on several other executives with relevant experience to help position the company for ongoing expansion.
Because Neighbor is still in what Woodbury described as its early stages of growth, the company is largely focused on building awareness. It has taken a market-by-market approach to doing so, seeking to secure enough hosts to meet the demand of renters in the market.
“We want renters to see several options in their neighborhood and find the perfect space for their items,” said Woodbury. “They might want to store their RV, but if all they see is a bedroom and an attic, that’s not going to work.”
While the company uses various marketing channels to drive awareness and attract both hosts and renters, it also sees strong growth through word of mouth, he said. Users often discover the service and sign up months before the company has built out the market.
With demand growing, and with funding in place to fuel its strategic expansion, Neighbor is hoping to become a household name in self-storage.
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