What to Know About Investing in Self Storage

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Although the percentage of self storage investments may be low compared to the entire commercial real estate sector, the self storage industry is rapidly maturing into a core asset class on par with office, retail, multifamily, and industrial.

There is currently more than 1.5 billion square feet of self storage space in the U.S., and 1 out of every 3 Americans use self storage space, according to the Self Storage Association’s most recent Self Storage Demand Study.

While self storage properties may fly under the radar screen of many, there are more self storage facilities in the U.S. than all of the Subway, KFC, Pizza Hut, and Taco Bell locations combined.

Characteristics of the self storage asset class

Self storage properties are often viewed as the ideal asset class for conservative investors seeking more predictable returns than value-add or opportunistic investments. 

Both general consumers and businesses rent self storage space

As with most commercial real estate projects, the new construction of self storage facilities slowed during the pandemic. However, the new supply of self storage space in the pipeline remains steady, driven by robust investor demand and economic recovery. 

Developers delivered 64 million square feet of self storage space last year, and another 49 million square feet will come onto the market in 2021. The national average monthly rent for self storage space is $1.37 per square foot, with the average self storage unit renting for $145 per month.

While self storage has long been used for consumer storage, businesses are also driving demand. 

According to a recent Reporterlinker study, clothing manufacturers producing seasonal items are opting for temporary self storage space as a more cost-effective alternative to traditional year-round warehouse space

E-commerce players are increasingly using self storage space to store products for last-mile delivery, helping to mitigate inventory management problems and strengthen supply chain operations.

H1 2021 Self Storage Performance Statistics

According to research and analysis by Greysteel, the self storage industry continues to out-perform many other commercial real estate asset classes:

  • The national average rent for a 10’ x 10’ self storage unit is currently $128 per month.
  • Street rates for 10’ x 10’ non-climate controlled self storage units have increased by 10.7% year-over-year (June 2021 vs. June 2020).
  • National rates for 10’ x 10’ climate controlled self storage rose by 12.8% year-over-year.
  • All top markets have seen street rental rates increase by at least 5% year-over-year, except for Minneapolis (4.4%) and Pittsburgh (3.2%).
  • The new-supply pipeline of self storage space has remained steady, with 9.7 million SF delivered in H1 2021, 9.3 million SF currently under construction, and 10.2 million SF proposed.
  • Self storage sales volume surpassed $6 billion in 2020, the highest transaction volume on record.
  • Deal activity in the self storage sector was nearly 30% higher than in 2019, with institutional investors like Blackstone and NexPoint Advisors completing two deals alone worth more than $2.1 billion.
  • Self storage sales volume surpassed $4.9 billion in the first half of 2021 and is on track to exceed $8.0 billion this year.
  • Median sales price per square foot for self storage property has increased from $68.28 in 2020 to $77.49 as of H1 2021, a year-over-year increase of 13.5% and nearly a 60% increase since 2015.
  • Median cap rates for self storage property have compressed to 6.5% year-to-date, marking a 10-year low.
  • Growth in the self storage sector is expected to remain positive, with demand driven by the pandemic recovery and the overall steady demand for self storage space.

Top Markets for Self Storage Investment

The most recent Yardi STORAGECafé self storage industry statistics report takes a closer look at national trends in the self storage asset class:

Cities with the highest monthly self storage rent

  • New York City, NY $396
  • San Rafael, CA $318
  • Santa Barbara, CA $280
  • Honolulu, HI $275
  • San Francisco, CA $273
  • Brooklyn, NY $268
  • Los Angeles, CA $257
  • Santa Cruz, CA $253
  • Long Island City, NY $251
  • Richmond, CA $234

Cheapest cities for self storage

  • Claremore, OK $48
  • Bardstown, KY $50
  • Alamogordo, NM $56
  • West Bend, WI $57
  • Cabot, AR $59
  • Chesterton, IN $60
  • Dalton, GA $61
  • Stillwater, OK $61
  • Shawnee, OK $62
  • Moore, OK $63

Markets with the most self storage inventory

  • New York, NJ-NY 68.7 MSF
  • Dallas-Fort Worth, TX 66.8 MSF
  • Los Angeles, CA 65.9 MSF
  • Houston, TX 64.8 MSF
  • Chicago IL-IN-WI 47.6 MSF
  • Miami, FL 38.7 MSF
  • Atlanta, GA 37.8 MSF
  • Phoenix, AZ 33.6 MSF
  • Inland Empire, CA 31.7 MSF
  • San Francisco Penin. & East Bay, CA 31.4 MSF

Top markets for new self storage completions in 2020

  • New York, NJ-NY 3.5 million square feet (MSF)
  • Dallas-Fort Worth, TX 2.2 MSF
  • Phoenix, AZ 2.0 MSF
  • Chicago, IL-IN-WI 1.5 MSF
  • Seattle, WA 1.5 MSF
  • Miami, FL 1.5 MSF
  • Atlanta, GA 1.4 MSF
  • Washington DC, DC-MD-VA 1.3 MSF
  • Portland, OR-WA 1.3 MSF
  • Minneapolis, MN-WI 1.2 MSF

Things to Know Before Investing in Self Storage

Millennials are by far the largest cohort of users of self storage space, with 36% keeping items in storage. More than two-thirds of millennials rent self storage units because of relocation, not having enough space at home, or a change in household size.

Overall, when looking at self storage rental patterns, 33% of users rent for between 2-6 months, while 39% rent for over one year. Over 50% of self storage users rent unit sizes of 10’ x 10’ or larger, while nearly twice as many women as men rent self storage space.

Here are some of the pros and cons to investing in the self storage asset class:

Pros

  • Minimal construction costs with self storage units easy to build and maintain.
  • Economically resilient with self storage seeing demand through all economic cycles.
  • A flexible business model with short-term leases allows owners to adjust rental rates to market demand.
  • Value-add revenue streams from products such as packing supplies, moving equipment, and tenant-insurance.

Cons

  • Self storage unit mix and amenities – such as interior vs. drive-up space, climate-controlled, and 24/7 access – must be carefully analyzed to meet the local market’s needs.
  • Hiring and retaining on-site management for larger self storage facilities can be challenging.
  • Changing tenant demographics may affect the future demand for self storage space.
  • Month-to-month leases can mean a larger percentage of tenant turnover.

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Shanti Ryle

Content Marketing Manager

Shanti leads Crexi's content marketing strategies with 7+ years of content development experience, creating everything from blog posts to award-winning podcasts. Previously, she worked on content teams at Snapchat, Weedmaps, and HopSkipDrive as well as developed copy, articles, and media for freelance publications.

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