1. Recession Resilience:
One of the most appealing aspects of self-storage investments is their resilience during economic downturns. Unlike other real estate sectors, self-storage often remains stable or even experiences growth during recessions. This is because during tough economic times, individuals and businesses tend to downsize, relocate, or seek cost-effective storage solutions for their belongings.
2. Self-Storage Real Estate Has Low Overhead Costs:
Compared to other real estate investments like residential or commercial properties, self-storage facilities generally have lower overhead costs. They require less maintenance, fewer staff, and have lower operational expenses. This can lead to a higher net operating income and a more favorable return on investment.
3. High Demand:
The demand for self-storage has been consistently high due to various factors such as urbanization, downsizing trends among baby boomers, and the growth of small businesses that require space for inventory. Additionally, life events such as marriages, divorces, and relocations often create a need for temporary storage solutions.
4. Diverse Customer Base:
Self storage facilities cater to a broad customer base, including individuals, families, students, businesses, and military personnel. This diversity helps in maintaining a steady flow of tenants and reduces the risk of income loss from any single tenant group.
Investors in self-storage can start with a single facility and expand their portfolio over time. The modular nature of self-storage units allows for easy expansion or contraction based on demand. This scalability is a significant advantage for investors looking to grow their investment gradually.
6. Technological Advancements:
The self-storage industry has embraced technology, making operations more efficient and customer friendly. Online booking, automated billing, and security systems have made self-storage more accessible and secure, attracting more customers and reducing operational costs.
7. Attractive Financing Options:
Lenders often view self-storage as a low-risk investment, which can lead to favorable financing options for investors. The ability to secure loans at competitive rates can significantly enhance the profitability of a self-storage investment.
8. Value-Add Opportunities:
Many self-storage facilities offer potential for value-add improvements. Upgrading security features, enhancing accessibility, and adding climate-controlled units are some ways investors can increase the value and appeal of their facilities, leading to higher rents and occupancy rates.
9. Passive Income Potential:
For investors seeking a relatively passive income stream, self-storage can be an attractive option. With the possibility of outsourcing day-to-day management to professional companies, investors can enjoy the benefits of property ownership without the need for active involvement.
Investing in self-storage can be a strategic move for portfolio diversification. It offers a unique asset class that behaves differently from stocks, bonds, and other real estate sectors, providing a hedge against market volatility.
Forecasting into 2024:
Q4 2023 outperformed Q4 2022, we can expect the market to continue to level out and a seasonality approach coming back into play (Usually higher occupancy during the spring and summer). Unlike 2021, we continue to see more attractive returns from our development groups that prioritize site selection and the development of self-storage over buying existing facilities. We are not seeing a lot of distress as the industry continues to stabilize, and while it is not the self-storage gold rush of 21’, there are still great opportunities for sound investments in the industry.
In conclusion, self-storage investments offer a combination of stability, profitability, and growth potential. Self-storage has proven to be a resilient and lucrative option for many investors, particularly those looking for a balance between passive income and long-term capital appreciation.