3d ago (edited) in General discussion
👀Why Self Storage?
The self-storage industry continues to grow steadily, driven by changing consumer habits and market needs. Here are the key reasons why self-storage appeals to commercial real estate investors.
Consistent Demand
While self-storage activity peaks from April to September, demand remains strong year-round. People and businesses consistently need extra space for downsizing, moving, or additional storage needs.
This steady demand creates reliable client flow and reduces vacancy risks, making self-storage a stable investment. The industry's strength is evident in its impressive 92% nationwide occupancy rate in 2022.
Limited Competition
Compared to many other commercial real estate sectors, self-storage remains a fragmented industry with limited competition in many areas. Though major players exist, smaller investors can still enter the market and develop profitable storage facilities. The SelfStorage Almanac of 2023 reports over 51,000 active storage facilities in the U.S. Ownership is distributed across different types of investors. According to SpareFoot, six public companies control 36.6% of rentable self-storage space, while operators hold 22.4% and private investors own 41%.
Strong Cash Flow
Self-storage assets generate strong cash flow through monthly tenant payments and low operating costs. The month-to-month lease structure enables owners to adjust rental rates regularly, creating opportunities for consistent revenue growth.
Average Monthly Cost for a 10′ x 10′ Storage Unit
- Standard Unit:Â $116.46
- Climate Controlled:Â $134.20
Source: Life Storage Blog
Lower Operating Costs
Operating a facility is relatively straightforward compared to other real estate ventures. Investors can benefit from self-storage as it provides a hassle-free means of generating investment returns.
The expenses associated with operating these facilities typically range from 30% to 40% of Effective Gross Income, depending on the size and location of the facility. These costs primarily include utilities, payroll, site maintenance, and marketing. It is important to note that smaller mom and pop facilities operate at an even lower percentage, sometimes 10% to 20%.
Recession-Resistant Investment
Unlike other industries that face increased vacancies and lower rental rates during economic downturns, self-storage has historically shown remarkable stability. The demand for storage space often rises during these challenging periods as both individuals and organizations need temporary solutions while downsizing.
Market Data
According to Storeganise, the average cap rate for self-storage facilities stands at 6.5%. The sector generated over $39 billion in revenue in 2022. YardiMatrix reports that self-storage usage grew to 14.5 million customers in 2022—an increase of 970,000 since 2020.
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👀Why Self Storage?
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