Self-Storage: The Latest Booming Business
July 20, 2018
The locks that open the self-storage containers are also holding the combinations to one of commercial real estate’s biggest industries.
2018 is proving to be a wonderful time to be involved in the self-storage industry.
Business is booming for the commercial real estate self-storage-sector, and its demand is on the rise!
Despite constant recessions and demographic shifts over the past few years, self-storage locker establishments are flying high in the real estate world. In fact, they’ve proven to be one of the better investments in real estate over the last half century, whereas other, once safe investments have fallen victim to struggle. Behind the combination locks and roll-up doors of the self-storage industry lies a $38-billion sector.
So how did this unexpected phenomenon come to be? And where can we expect it to head? The experts at Valbridge Property Advisors share the latest news and info centered on the self-storage industry.
Self-Storage is Building off Market Demand
When you think about it, it makes a lot of sense – downsizing retirees, recent college graduates, young couples, and the growing ranks of home renters across the nation are leading to the creation of a chronic need for somewhere to put all their belongings. The significant demand is helping to maintain what many experts are calling a recession-proof industry.
As of today, there are roughly 54,000 self-storage facilities throughout the United States. That number accounts for 90 percent of the global self-storage inventory. Those sites hold 2.63 billion square feet of rentable storage – an area roughly the size of Palm Springs, California! But it hasn’t always been that way. Let’s take a step back…
History of the Self-Storage Industry
The self-storage industry really came into the commercial real estate scene during the 19th century, when movers built warehouses for their business customers. In fact, the first modern self-storage units, outfitted with garage doors and private storage spaces, opened in the state of Texas in 1964.
Initially, this first storage business operated for an oil industry that might need a temporary place to store equipment. But consumers soon began filling the spaces with stuff like old couches and other, unwanted pieces of furniture – hence, the birth of the modern self-storage industry made its way into the world.
Booming By the Numbers
According to a recent report by the Wall Street Journal, Extra Space Storage Inc., a leader in the self-storage industry, has seen its stock market value climb 33 percent so far this year. And this serves as just one example of an industry-wide trend.
Major investment firms have also shown a growing interest in the self-storage sector. According to WSJ, Carlyle Group LP has reportedly invested $80 million in building projects in Southern California and the Pacific Northwest while Harrison Street Capital LLC has eyed selling its portfolio of profitable facilities.
Furthermore, Extra Space reported 94.5 percent of its space was occupied in the second quarter of 2018, up from 92.1 percent year-over-year. As if that weren’t enough – the company closed on a $1.3 billion deal to buy SmartStop Self Storage earlier this year. Such a venture at that high of a price would’ve reportedly been impossible only a few years ago.
More numbers to digest: the self-storage industry made $32.7 billion in 2016, according to Bloomberg. Self-storage has seen 7.7 percent annual growth since 2012, and now employs 144,000 nationwide. The sector is high in demand – one in 11 Americans spends an average of $91.14 per month to utilize self-storage lockers.
The Growing Valuation of Self-Storage
Both customer rental prices and sales prices are currently up and on the rise, as demand has grown. The only challenge now is that timelines to build and bring a facility into the market have slowed. However, large firms continue to build, and already-established units continue to flourish.
Again, it’s a great time for the self-storage industry. With that being said, though, building a new self-storage business can be challenging. But the industry offers plenty of opportunities for profit.
Getting a Foot in the Self-Storage Sector
The key advantage of the self-storage industry is that it has proven to be recession-resistant. After all, businesses and individuals alike will always need a place to store their things.
Those in the industry should plan ahead, strategizing for how he or she can build a business that maintains and retains customers even during the ‘tough times.’ Innovation is important here, but focusing on quality and downsizing at appropriate times is also important as the economy fluxes and refluxes.
Gage Cost with ROI
The self-storage industry isn’t as entirely as glamorous as other businesses. In fact, some local governments have taken measures to try to stop the construction of additional self-storage businesses at the expense of other ventures.
So why are self-storage businesses remaining so successful? Because they are good at keeping costs down in order to reap the benefits of their return on investment from commercial property purchase. How do they do this? Well, it’s simple, really…
Break Into the Booming Biz with a Trusted Appraiser
Whether you’re a seasoned veteran in the self-storage industry looking to venture out, or a novice hoping to break into one of the commercial world’s biggest gems right now, you can rest assured knowing that you pair with an experienced and trusted property advisor.
When you look to develop new or purchase and invest in a commercial space for self-storage, knowing the true value of that space becomes more important than ever. But property value can be very difficult to discern especially in today’s highly scrutinized regulatory environment. But that’s our specialty at Valbridge Property Advisors, where in addition to valuation services we also provide in-depth market studies and feasibility analyses for the Self-Storage industry.
The expert appraisers at Valbridge evaluate commercial property based on objective criteria, in-depth knowledge of local property markets and time-tested judgment. We identify and analyze the variables that affect value, often seeing what others don’t see based on our expertise and independence.
Contact the experts at Valbridge today and let’s talk about how we can work together to make all of your self-storage dreams and aspirations a reality!