Self storage proved itself again to be a reliable sector during challenging times. With people downsizing, companies giving up physical premises and college kids not on campus, self storage adapted, widened its customer base and gained even more public appreciation. But can it profit from these advantages going forward and continue to be a good option for investors?
During the pandemic, self storage was one of the CRE sectors that had access to plentiful capital, and the amount of space planned or under construction nationwide has been rising gradually month over month, per Yardi Matrix data. The national average rate for a non-climate-controlled 10×10 storage unit is currently $128, a 9% increase year-over-year, with corresponding figures for the Atlanta and Miami metropolitan areas as high as 16% and 20%. It certainly looks as if self storage operators and developers have reasons to be cheerful right now.
But what of the future? The streamlined, contact-free procedures put in place to maintain hygiene can still boost efficiency even when health concerns have diminished. And any increased diversity in the sector’s customer base could bode well for the long-term. On the negative side, construction costs didn’t get any cheaper. Is it still a great sector for small-scale investment or are bigger players taking over? Then there is the enduringly local nature of the industry — does this apply across the country or are some areas much better prospects than others?
To get more details about investing in self storage right now, we got expert opinions from Michael Bull (President, Office Investment Sales CEO) and Tyler McKee (President, Self Storage Group) of Bull Realty. This Atlanta-based company specializes in commercial real estate sales, leasing and advisory services and produces the popular Commercial Real Estate Show podcasts.
1. Self storage is often an essential service during crises, and it can weather them better. For investors, has the pandemic now put the industry in a more secure position than other real estate sectors going forward?
While Self-Storage has proven resilient in previous recessions and market cycles, this pandemic has created even more demand as people have:
a. moved during the pandemic,
b. have needed more room to work from home,
c. have bought more items needing storage like boats, bikes and campers and
d. companies shutting down office space have had increased storage needs.
2. Self storage is known for its mom-and-pop operations and for being relatively easy to start out in. Has the pandemic caused a shift in which types of investors are now looking at the self storage industry?
There has been a shift to more institutional investors in the sector. For example, Bill Gates became part owner of StorageMart in 2020. Self-Storage is sought after by REITS and for good reason. Self-storage REITS in Q1 and Q2 were the top performing sector in commercial real estate. For mom-and-pop owners 2021 might be the right time to consider selling with recent demand surge firming up performance. Many owners are selling while interest rates are low, before the possible increases in capital gains and before 1031 exchange is possibly limited to $500K.
3. Contactless operations were implemented across the industry and unmanned facilities are now more common. What aspects of self storage facilities do you think will most benefit from focused investment in the wake of the pandemic?
Technology has enhanced operations making properties safer health wise and more efficient economically. Some of the most beneficial are cell phone apps and online rental agreements. Another beneficial contactless operation is the implementation of online auctions, which allows more convenient auctions while also attracting a much larger buyer pool.
4. Which geographical areas do you envisage self storage developers investigating now to find new customer bases and to avoid over-saturation?
We have seen migration to the Southeast and Sun Belt which has led to heavy development. Self-storage is hyper-local. Many cities make it difficult for more storage facilities to be built. Look for opportunities in markets with a higher barrier to entry and for properties in the southeast and sun belt.
5. Repurposing vacant retail properties has been a win-win for the self storage industry, and for residents and town halls. Do you envisage new trends regarding how self storage facilities will be developed?
Adaptive reuse will continue to evolve including conversions of retail properties, office buildings, hotels, and cold storage buildings. Conversions are a great way to develop storage where high construction costs, zoning restrictions or lack of available sites may otherwise hinder development.
Self storage still promises good investment opportunities as we look toward the end of the pandemic. People who never rented storage before are now used to storing a wide range of items, requiring units in a variety of sizes. Self storage development has continued apace, and cost-effective conversion projects are considered by many to be the way forward. While family-run businesses might consider it a good time to sell, by adopting new operations that evolved during the pandemic, they might alternatively prefer to profit from the industry’s current good health. To find a location to start or expand a self storage business, the local nature of the industry means new customer bases can often still be found — the Southern states clearly beckon, and they’ll be plenty of demand for climate-control there!
Fall Cleaning Checklist: Your Guide To A Cozy, Organized Home This Season
Many of us feel the urge to prepare our homes for the season ahead as soon as the first yellow leaves hit the ground. With days growing shorter, families spending more time indoors, and holiday gatherings appearing on the horizon, it’s only natural that we want our homes to be neat, tidy and comfy.
How to Move a TV: The Right Way to Pack, Transport and Store Any Television
TVs rank among the most stressful items to move. They’re large, awkward to carry and one wrong move can leave you with a cracked screen or dead pixels. Modern LED, OLED, and QLED panels are significantly more fragile than the heavy TVs of the past. Their screens are thin, their internal components are delicate, and they’re designed to sit still on a stand, not ride in the back of a moving truck.
How to Store Bedding the Right Way (Without Smells or Flattened Fills)
If you’ve ever pulled a comforter out of storage and immediately caught a whiff of something musty, you know how frustrating it can be. Good quality bedding can be quite expensive, so you definitely want to keep what you own in pristine conditions.
Where to Get Moving Boxes in NYC: Your Complete Guide
Moving across New York City comes with all sorts of logistical puzzles. You’re working around narrow staircases, building freight elevators with limited hours, alternate-side parking windows, and doormen who’d rather you weren’t blocking the lobby with a dolly. The last thing you want to be scrambling for on top of all that is moving boxes.
How to Keep Personal Belongings Organized When Living Together
You dreamed of the Friends apartment. Or maybe just a tidy place where you and your roommate had your own corners of the world. For couples, living together was supposed to feel like home. For multigenerational living, it was supposed to bring everyone closer. What nobody warns you about is that living together introduces a whole new layer of organization in shared spaces. Your stuff, their stuff and everyone’s habits are competing for the same square footage.
Where to Donate Furniture in San Francisco: 6 Organizations That Make It Easy
San Francisco has no shortage of places to donate furniture, which is good news in a place where moving trucks seem to be a permanent part of the streetscape. Anyone who’s ever watched three friends pivot a couch around the tight corner of a San Francisco Victorian knows moving day here can turn into a spectator sport. Apartments change, roommates come and go and sometimes the couch that fit in one place might not make the trip to the next.
How to Store Ties: Closet, Drawer and Travel Scenarios
The best way to keep your ties wrinkle-free is to just learn how to properly store them. You can start by knowing to never store ties knotted, in tight rolls, or exposed to direct sunlight or heat (which causes discoloration). But there are a few extra steps you can take to ensure your ties stay in top form. Let’s go through all the places and ways you can store your ties, and you may never have to worry about a crumpled necktie again in your life.
How to Store Belts (Without any Hassle)
A clothing accessory dating back to the Bronze Age, belts can still make or break your swing at a fashion statement. So, yes, it is worth knowing how to store belts properly. The right method can help prevent creases, cracks, scratches and unnecessary wear. Let us see what that method entails (Spoiler alert: it’s all easier than you think).
Where to Donate Books in Chicago
As much as we don’t like giving up books, sometimes we just have to in order to create the mental and bookshelf space for new literary adventures. But we all want to make sure our books aren’t wasted and get a second life. Chicago has a generous network of organizations that will put your books back into the hands of readers who’ll treasure them. Here’s where to donate books in Chicago, based on our research.