------ Monolith Group Development :: Self-Storage Industry and Investment Facts

What's So Attractive About Self-Storage?

Why Self storage?

Self-storage is the fastest growing sector of commercial real estate and a stable investment when compared to other asset classes. The investment community has recently taken notice of self-storage as a viable commercial real estate asset class, and the underlying dynamics continue to fuel the sector’s success. With 1 in 10 American households utilizing self-storage on a regular basis, the sector repeatedly generates more than $22 billion in annual U.S. revenues for it's investors and management companies.

Self-Storage Advantages Over Other Commercial Asset Classes

  1. Adaptability... facilities are generally built in densely populated areas. Because the tenant base at is large, owners tend to be protected from long-term vacancies that often occur in other commercial real estate categories. Furthermore, given the short-term nature of rentals, operators have a unique ability to rapidly adapt to market conditions.
  2. Stable Cash Flow... Consumers use self-storage for many different reasons, including household downsizes, renovations, relocations, military posts, and for holding business records. Some of these motives become more prevalent during economic downturns, lending a counter-cyclical feature to the sector. Moreover, because people are slow to leave these facilities once they’ve rented space, turnover is less of an issue than the short-term contracts might lead one to expect. Finally, the large number of rentable spaces in most facilities also means that owners are not vulnerable to large swings in vacancy rates.
  3. Low-maintenance... Tenant improvements don't exist! Marketing costs tend to be low as location and a website are the primary drivers of new tenants. Costly marketing programs and Yellow Page ads campaigns are no longer necessary.
  4. Fragmented Market... Nearly 80% of self-storage properties remain in the hands of small, independent investors. The sector’s solid past performance has begun to capture the attention of large institutional investors. Larger properties in particular are increasingly the subject of interest from institutional buyers, including the larger self-storage companies that run themselves as real estate investment trusts (REITs).
  5. Competitive Factors... Like other real estate asset classes, self-storage facilities can be classed as Class A, Class B, and Class C properties. Location and the physical condition of the building remain primary factors in this assessment, with the population inside of a few-mile radius serving as the target demographic. Development of new properties has been extremely limited over the past five years, aiding the recent pricing stability for existing properties. Owners have, however, begun to compete on the basis of other enhancements, including:
    1. Electronic access control, with proximity cards or even biometric scanners
    2. Climate-control features or “green” eco-friendly units
    3. Web marketing or mobile apps that allow for online unit reservation and bill-paying

How Many Facilities Are There?

There are over 54,000 Self-Storage facilities in the USA.

Average Size of Primary Facility

The average (mean) size of a “primary” self storage facility in the USA is approximately 56,900 Square Feet.

Acquisition Volume

Approximately $2.8 billion acquisition volume in 2015.

How Much Do We Really Store?

Americans store 2.3 billion square feet of stuff, which is more than 78 square miles–three times the size of Manhattan

How Many Developments In 2015?

Only 41 properties were constructed in 2015 out of the 159 announced. The limited new development in key markets presented little impact in those markets.

Is Demand For Storage Increasing?

  1. 1996: 1 in 17 Households used storage
  2. 2013: 1 in 9.3 Households used storage
  3. 2016: 1 in 7 Households used storage... a 60% INCREASE

Do People Really Use Self-Storage

Everyone needs self-storage at some point in their lives. A life event of some sort drives an individual to a storage facility and in the best and worst of times, it is a necessity. As a society, we pride ourselves on the accumulation of goods over time and we tend to be hesitant to throw these items out. Recessions have little impact on self-storage... homeowners downsizing will often need to store their goods until the recession is over.The recent recession hurt the sector only slightly; displaced homeowners often moved to apartments or smaller homes and still needed to store excess household items.

Why Demand For Self-Storage Remains Steady

Despite the short-term rental contracts, that pervasive reluctantance to rid our lives of our precious memories continues to drive consumers to self-storage. Once in storage, people tend to stay for extended periods of time. Estimates are that one-third of storage space is filled with items that have been there for over three years.