Why Invest in Self Storage?
Self Storage – High Demand
Americans have a strong demand for self storage space. There are now over 50,000 self storage facilities located throughout the United States. The demand for self storage space is continuing to grow as evidenced by the fact that in 1996 1 out of 16 USA households rented a self storage unit, versus, 1 out of 10 today.
Great Return on Investment
Self Storage Investments properties are also seeing significant increases in value too! For example, the Sale Prices of high quality self storage properties have risen by more than 30% over the past 7 years (8% Cap Rate versus 5% Cap Rates). It is important to note that of Commercial Real Estate REITs, the Storage Sector has had the best investment results over the past 20 years, including the last five years past 5 years (2008 -2012), with an average national average of 34.5% for self-storage (the next closest investment was apartments at 8.8%).
Good Acquisition Opportunities
The self storage industry today is still one that is considered a “mom and pop” industry from the stand point of ownership. The fact is that over 80% of self storage properties are owned by individual investors (those that own less than 3 properties). However, this landscape is starting to change quickly due to the fact that competition and marketing in the industry has significantly changed over the past 5 years and Institutional Real Estate Investment Trusts are paying top dollar for such properties.
Self Storage Marketing has become increasing more difficult and sophisticated in recent years due to the internet. In fact, several of the large publicly traded Self Storage REIT operators report that over 60% of their new tenants are contacting their facilities as a result of performing a search over the internet. With this knowledge in hand, large self storage companies are now investing millions of dollars into state of the art internet marketing programs that allow them to receive top search engine rankings. The result of this change in marketing has hurt occupancy rates for many “mom and pop” self storage operators causing many of them to consider selling their properties.
Go here to see an example of high quality independently owned self storage facility that provides storage in San Clemente CA called San Clemente Self Storage.
Self Storage Development
Development of new self storage properties is still considered slow when compared to the boom days prior to the start of the 2008 economic recession. The five years prior to 2008, saw significant development growth in the USA, averaging over 3000 new properties being created each year.
Today, developing new self storage projects is much more difficult than in the past. Less than 2,000 new sites have been developed over the past few years. The main reasons for lack of new development are attributed to stiff lending requirements, difficult real estate entitlement processes, and Cities wanting industries that create numerous jobs.
At the end of the day, self storage facilities offer local cities a great storage solution for their residents and businesses, however, they do not employ a large number of people- which all cities want. For example, a 70,000 square foot storage facility might have 3 full-time employees, versus, a manufacturing facility of the same size employing nearly 70 people, which equates to more people and more revenue to a city.
The Future is Bright For Self Storage
As the American consumer continues to have a high demand to purchase more items, and this demand certainly does not seem to be slowing, most people will turn to self storage as their preferred source to store their valued belongings. It is clear that the self storage industry will become more “Institutional” in the future as many “mom and pop” operators sell their investments. However, this does not necessarily mean that individual investors cannot flourish in the self storage industry, it just means that the new buyers and existing operators will have to have more sophisticated resources than those used in the past.
Go here to check out more self storage industry statistics now!
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