The self-storage sector has emerged as one of the strongest and most resilient real estate categories, due partly to life-cycle events among large demographic groups, an especially strong housing market and increased self-storage use by retailers and employers.
Life-cycle events, including divorce and death, have long driven self-storage needs. A recent article in MultiHousing News lists “displacement” and “disaster” as two additional “Ds” influencing demand.
Originally created as a parking-garage-like concrete bunker with garage-style doors, self-storage facilities now feature climate-controlled environments and 24/7 video monitoring systems. Approximately two billion square feet of space exists in the United States, according to the Self Storage Association.
The rental performance of 10 x 10’ self-storage units – both climate-controlled and non-climate-controlled – remained positive “for the fifth month in a row” and improved approximately 3% on a year-over-year basis, according to MultiHousing News, quoting research published by Yardi Matrix.
This insight is confirmed by Klein Enterprises which, in a partnership with Morningstar Storage, operates a self-storage facility in Severn and has two additional development sites in the Baltimore region.
“We remain bullish on the prospects for self-storage and continue to see related demand drivers, such as suburban relocation and multifamily development,” explained Sean Garland, Chief Investment Officer with the company. “Further, we’re encouraged by the resilience of the asset class throughout economic downturns particularly over the past 12 months. Increased capital and attention have certainly made acquisition pricing more challenging, but we see continued opportunities for development and conversion in undersupplied markets with supportive demographics for those with the required expertise.”
The popularity of self-storage units has grown exponentially from its original solution for homeowners and renters who needed to stash overflow household items. Because of its lower rental costs, the product category is now typically utilized by retailers for the inventory management of goods and by businesses to store documents, office equipment and furniture.
According to ResearchandMarkets.com, the national self-storage industry is expected to expand at a nearly 4.7% compound annual growth rate over the next five years. Primary reasons given for this uptick include (1) residential downsizing among all demographic classes seeking a minimalistic existence, (2) baby boomers entering retirement and in need of storage space for a lifetime of possessions and (3) the attractive investment potential of this asset class.
Many businesses are also downsizing themselves and in need of temporary space to store office furniture and equipment that may be needed down the line.
“Self-storage occupancies were at all-time highs in Q4 2020. Utilization of the product has increased over the last 15 years from 6% of households to 10% of households and is expected to continue to increase,” stated Peter Garver, President, Garver Development Group. “Millennials are currently the top user amongst generations. While many submarkets are now saturated due to development activity over the last decade or so, there are still demand drivers.”
Garver Development co-owns a self-storage site that is currently operating, with a second scheduled to open in second quarter of this year in Pikesville. The company also has offers for two additional sites.
“Our self-storage portfolio experienced extremely high occupancy, combined with a low delinquency during the pandemic, which speaks to the resiliency and strength of this product category during any economic cycle,” said Teresa Rosier Vice President of Peak Management and YourSpace Storage. The local company operates more than 7,300 self-storage units throughout Maryland, Pennsylvania and Delaware.
“The residential market is particularly exploding and homeowners are renting spaces to store furniture as they stage their homes for sale. The units are also being used as an intermediary spot to place items while homeowners wait for their next house to become available,” she added.
Rosier is also seeing an uptick in activity among businesses. “Because our units are significantly less expensive than renting a warehouse, we are having companies involved in various business sectors utilizing our units for short and long-term uses. The pharmaceutical sector has been particularly active. As a result, we are expanding and adding units at several locations throughout the area.”