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Self Storage Is Meeting Demand By Getting Younger, Cooler, and More Creative

Adam Shapiro

Mar 22, 2023

Self Storage Is Meeting Demand

The self-storage sector witnessed a moderation in H1 2023, stepping back from the record highs seen in 2022, attributing this trend to a slowdown in rent growth and occupancy rates. Despite these economic shifts, underlying market fundamentals and consistent demand trends continue to allure investors. Notably, the sector witnessed a surge in utilization, with 14.5 million people opting for self-storage in 2022, marking an increase of 970,000 since 2020, as per YardiMatrix data. Investors maintain an optimistic outlook for the sector due to its resilience, foreseeing more favorable risk-adjusted returns in the upcoming quarter.

The sector's resilience stems from various factors: robust economies stimulate higher consumer goods purchases, fostering storage needs, while economic downturns prompt residential downsizing, also leading to heightened storage demand. Moreover, the transitioning of baby boomers into fixed-income lifestyles escalates the necessity for downsizing, contributing to sustained demand. These factors collectively fortify the self-storage sector, positioning it for substantial growth and profitability ahead.

A testament to its investment potential, Real Estate Daily News reported an impressive almost 17% annual return on investments for self-storage facility owners across the United States over a recent nine-year period.

Street rates for a 10×10 non-climate-controlled unit averaged $134 per month as of July 2023, remaining steady from the May average. However, there's been negative year-over-year growth in street rates for this unit type. Despite the seasonal slowdown, the sector's supply remains robust, with over 4,750 properties currently under development, constituting 3.6% of the existing inventory. Anticipated completions by late 2023 are met with excitement, but a balanced influx of new properties is essential to align supply with demand. StorageCafe estimates a market entry of 98.2 million square feet of storage across the U.S. in 2023.

Observing industry trends, the self-storage sector is tailoring services to appeal to millennials, a population that favors urban living but faces space constraints in apartments. Adapting to this demand, operators are implementing tech-infused solutions like self-storage in-store kiosks, as showcased by Store Space. These kiosks streamline services, cut operational costs, and offer 24/7 accessibility, enhancing customer satisfaction.

Another notable trend is the utilization of storage units by emerging e-commerce businesses. The surge in online shopping has increased the need for storage space to house products and supplies. Amidst the pandemic, many individuals started home-based businesses, leveraging storage units for inventory storage or items that don't fit into homes or apartments.

Among the top players in the U.S. self-storage sector based on the number of facilities are:

  1. Extra Space Storage (including recent acquisition of Life Storage)

  2. Public Storage

  3. Cube Smart

  4. U-Haul

  5. National Storage Affiliates


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