The self-storage industry continues to thrive as demand for space remains high among renters and homeowners, highlighting the growing need for storage solutions and their resilience in the face of space constraints.
A recent report by StorageCafe highlights that self-storage needs are on the rise due to various factors, such as the increasing popularity of hybrid work arrangements, shrinking apartment sizes, and urban-to-suburban migration patterns.
Self-storage units remain in high demand in the US, driven by various factors, including downsizing baby boomers, the growing recreational vehicle/van-life market, the booming e-commerce industry, and other significant demand generators.
According to the report, in 2022, 21% of Americans identified themselves as current self-storage users, and an additional 15% expressed their intention to use such services in the future.
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Which age groups utilize self-storage facilities the most?
Gen-Xers make up the largest portion of self-storage users in the US, accounting for 23% of the total, closely followed by millennials. Millennials are increasingly recognizing the need for additional storage space, possibly due to expanding families and improved financial situations, with approximately 21% of them reporting their use of self-storage services.
Insufficient space at home remains the primary reason for renting a storage unit, cited by 40% of respondents in the report, which marks a significant increase from the previous year’s 33%. On the other hand, 34% of respondents currently rent a unit due to moving homes, slightly down from the top reason of 36% in the previous survey.
Renters are more likely to utilize storage during relocation, at 44%, compared to homeowners at 25%, showing that renters tend to move more frequently and require storage solutions more often.
Which cities exhibit the highest demand for self-storage facilities?
The growing interest in self-storage is evident in the surge of search queries, particularly in New York City where searches have increased by 61% since 2019. This trend is unsurprising given the city’s high population density, small apartments, and transient population. Despite historical undersupply issues, the self-storage industry in New York City is now witnessing new development projects, accounting for 7.2% of the current inventory, the second-highest figure in the country, after Orlando, Florida, according to the report.
Chicago and Los Angeles, the next two largest cities in the US, have also experienced a nearly tripled number of searches for self-storage in 2022 compared to 2019. Several cities in Texas, including Houston, San Antonio, Austin, and Dallas, feature in the top 10 cities with the highest number of self-storage searches. Phoenix, Arizona, and Orlando, Florida, have also seen a significant increase in searches since 2019, with over three times the number of searches.
Interestingly, Las Vegas, the smallest city in the top ten cities by storage searches, has demonstrated strong demand for self-storage and vehicle storage facilities, surpassing other large cities in this category. San Diego and Los Angeles record the highest number of searches for boat storage, with Colorado Springs and San Diego coming in second and third, respectively, for vehicle storage queries.
The southwestern region of the US, which has seen a notable influx of migration, has shown a rising demand for self-storage facilities. Moreover, self-storage rates in this region are comparatively more affordable than in other popular areas.
According to data from Yardi Matrix, the average rent for a regular, non-climate-controlled unit in cities such as Houston, Dallas-Fort Worth, Austin, Las Vegas, and Phoenix ranges from $94 to $124, which is below the national average.
Why Invest in a Self Storage Business?
Investing in a self-storage business can be an attractive opportunity for several reasons:
- Steady demand: Self-storage has demonstrated consistent and reliable demand, even during economic downturns. People and businesses require storage solutions for various reasons, such as downsizing, moving, decluttering, or storing valuable belongings, creating a stable demand for self-storage services.
- Resilience during economic fluctuations: Self-storage is often considered recession-resistant as people may downsize their homes or businesses during economic downturns but still need storage space for their belongings. This can provide a buffer against economic fluctuations and make self-storage a relatively stable investment option.
- Cash flow and income potential: Self-storage facilities typically generate regular monthly rental income, providing a reliable source of cash flow for investors. With effective management and occupancy rates, self-storage facilities can yield attractive returns on investment.
- Diversification: Investing in self-storage can offer diversification to an investment portfolio as it is a distinct asset class that is not closely correlated with traditional real estate or stock market investments. This can help spread risks and enhance overall portfolio diversification.
- Scalability and flexibility: Self-storage businesses can be scalable, allowing investors to expand and diversify their investments across multiple locations or facilities. Moreover, self-storage facilities can be flexible in terms of size, location, and amenities, allowing investors to tailor their investment strategies to specific market needs.
- Manageable operational complexities: Compared to other types of real estate investments, self-storage facilities typically have relatively lower operational complexities. They generally require minimal day-to-day management, and overhead costs can be manageable, allowing investors to focus on strategic decision-making and value-add opportunities.
- Potential for value-add opportunities: There may be opportunities for investors to add value to self-storage facilities through property improvements, marketing strategies, and operational efficiencies, which can lead to increased occupancy rates, rental rates, and overall profitability.
As with any investment, it is crucial to conduct thorough research, assess risks, and seek professional advice before making any investment decisions. Understanding the local market dynamics, competition, and regulatory requirements is also essential for a successful self-storage investment.
Is Self Storage Here to Stay?
Investors and consumers alike are in agreement: the self-storage industry is experiencing a positive upward trend. As the ongoing pandemic continues to impact migration patterns, the storage industry is poised to capitalize on these shifts, especially in under-saturated markets like the Midwest, which are expected to benefit from pandemic-induced and generational population migration.
Currently, the annual revenue of the self-storage industry stands at $39.5 billion. With Baby Boomers retiring and the workforce shifting away from traditional brick-and-mortar spaces, coupled with the increasing trend of urban living among consumers, this revenue is projected to grow further, making it a lucrative investment opportunity for those who choose to capitalize on it.