If you’re looking for a great investment opportunity, you can’t do better than self storage. It is one of the fastest growing real estate investment classes in the world. Over the 2020-2025 period, the self-storage market is expected to grow by a compound annual growth rate of 134.79%, from $87.65 billion to $115.62 billion. The industry is recession-proof, because people always need places to store their goods. The massive opportunity in self-storage has attracted investors such as Bill Gates, who invested in StorageMart, America’s eight largest self-storage company.
The recession-proof nature of the self-storage market is one of its most attractive features. The most important rule of investing is, “Don’t lose any money” and the second is, “Don’t forget the first rule”. You have to survive in the market before you can even think about making a profit. To tilt the odds in your favour, you need to be in an industry that is recession-proof. As we analyse the economic impact of the pandemic and the initial lockdowns, we can see that the self-storage market managed to stay afloat. According to a report by Trepp, delinquency rates on 1,700 loans for self-storage facilities were less impacted than those of loans in other real estate sectors.
What makes the self-storage business so robust are the changes in where people live. Urbanization has intensified and with millenials moving into their own places, there is a massive demand for self-storage facilities. And people are accumulating belongings at a faster rate than ever, so that they self-storage facilities to store their things, because their rental spaces are just too small.
Businesses have also gotten in on the act. Many businesses have had to downscale or relocate and often that means they need a place to store their things while they plan the next move or make a transition. That means self-storage facilities have an additional revenue segment they can rely on.
The rise of remote work has led to very decentralized organizational structures. Often, offices have been reduced to very small staff compliments, with the majority of the organization working remotely or working under a hybrid work model. This decentralized work model drastically reduces overhead costs and so businesses have moved to smaller offices and chosen to store their excess belongings in self-storage facilities. The difference between their initial overhead costs and the costs of managing from small office spaces and with their excess belongings in self-storage units, has led to huge savings.
Lifestyle changes are another source of demand for self-storage facilities. When people get divorced, for instance, one party typically has to move out of the house and often, move into much smaller accommodation. Where does their stuff go? A self-storage facility. Between March and June this year, the divorce rate went up 34% compared to 2019. The pandemic’s impact on livelihoods, marriage, and other aspects of human life, have forced many Americans to make major lifestyle changes that often necessitate the use of self-storage facilities.
Remote work is another source of demand. When your job and where you live no longer need to be in the same space, people often choose to leave big cities for smaller ones or even rural life. Where do their things go? Into the best portable storage pod they can find.