Self Storage Facilities are in High Demand

Over the last decade or so the self-storage sector of commercial real estate has seen a significant amount of growth in sales. In just the last five years self-storage facilities have seen an 80% increase in sales.

The majority of self-storage space is still owned by small business owners at an estimate of 74%, but larger companies and real estate investors have taken notice of the growth and demand in the market and are now getting on board to add self-storage spaces to their portfolios.

The high and growing demand for self-storage units had driven an expansion of self-storage facilities across the country with an average growth rate of 7.7% annually since 2012. SpareFoot Inc. has reported that around one in eleven Americans pays a monthly rent on average of $91.14 a month to store their extra stuff. In March of 2019, it was estimated that the amount of self- storage space in America equals out to around 5.4 square feet per renter. This is a significant amount compared to other wealthy countries around the world. In the U.K. there is an average of 4.6 square feet per renter and in Germany, it is only just over two square feet per renter.

Self—storage units have been a good investment in America, but will they continue to be?

To answer that there are three factors to consider before investing in self-storage.

Demand

The growing demand for self-storage is due to many different reasons. The self-storage sector has hung on steadily in demand even through lean times like the recession of 2007/2008. So self-storage seems to be a steady investment. Self-storage units used to be a place to store belongings temporarily during a large life transition such as a move, now units are becoming a permanent solution to needing more space to store belongings.

Many people are downsizing homes for various reasons (largely baby boomers) so they are looking for somewhere to store things like boats and RVs or even important family heirlooms. While others (mostly millennials) are seeking to live in densely populated urban areas that are easily walkable , which lands them in small apartments and condos.

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Supply

In the last three years, there has been a large number of new storage facilities built. Some of these facilities have been placed in areas that didn’t really need them resulting in an oversupply. These areas of oversupply have seen a slight rent rate decline due to the slow in demand. However, there are still plenty of areas that are seeing a growing need in supply and rent rates are healthy and even rising in these areas. So to be in a good area where supply is in demand it is best to do your homework.

Considering the Future

Experts project that the development of self-storage units will see a decrease over the next year to year and a half. The shift is expected to turn from development into investment. They predict that as the development of storage facilities slows it will again meet with a growth in demand and rents will begin to climb once again in areas that may have slowed. If you are looking to purchase and hold on to a self-storage facility for a while it just may turn out favorable.

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