Investing in Self Storage

Why self-storage?

… under construction, 😁I’m still figuring this out (Lane was here 11-3-2018)

 

The self-storage industry has market indicators that suggest that this area of real estate will only get hotter over the next several years.

Recession-resistant and has good recurring revenue because of the huge numbers of people using it at any given time. The number of tenants leaving does not impact the business overall.

Self storage vs other real estate classes:

1) Huge amounts of customers using self-storage lessens the risk of your space having no tenants at any given time. It means continuous profit.

2) Very low maintenance as compared to other real estate assets.

3) Month to month leasing and lien-loss advantage means self storage owners can dictate prices to beat inflation.

Forbes (2008) – every other real estate class was in the red except forself-storagee, which was up by 5%. This year was considered to be the worst economy for real estate.

For the past several years, there was a big change in the customer demographic of self storage. Before 2008, their main customers were commercial companies such as construction companies who used the storage to store construction materials. After 2008, the main customers became people coming from the residential sector.

People have too much stuff and the Amazon-effect is not helping.

The residential sector with increasing population continues to be the biggest demographic driver for the self storage industry.

Another driving factor for self storage is competition. Because self-storage facilities offer the same kinds of service and value-adds as the top real estate class providers provide, they rank as the best in their class (Class A facility range).

Retirees, especially those who are undergoing downsizing, rely a lot on the self storage industry. They consider self storage to be a temporary housing for their belongings when they downsize. The same correlation is also present in the U.S. especially in states with huge retirement communities.

In Florida (a big retiree state along with Arizona), the lack of storage rooms in Florida housing has became a very specific driving factor for the self storage industry. Houses in Florida are built without basements because of the high water table.

Self storage is amenable to accelerated depreciation. Because of how self storage facilities are made and the methods of construction that are used, it is considered to be a favorable climate during cost segregation analysis when it comes to taxes.

 

Reports for your digest:

18.11.05 – National Self Storage Report