The self-storage investment market has been around for a few decades, and now, this industry has become more lucrative compared to the other commercial real estate niches. A market forecast by Mordor Intelligence shows that the return on investment (ROI) and the compound annual growth rate (CAGR) of self-storage facilities will even get higher in the next few years.
Well, there are some good reasons why the interest in this type of investment is increasing. For starters, owning a storage units investment property does not require a lot of effort on your part compared to managing other types of properties. It means you don’t have to deal with contract services, employee training, toilet cleaning, and whatnot. It is also easier to get into the trade with the loan program provided by the Small Business Association (SBA), which is specially made for self-storage investors. Above all, the demand for storage spaces is always in demand even during economic crises, like the one brought about by the COVID-19 pandemic today.
Forces Driving the Demand for Self-Storage Units
People are buying more and more stuff, and they have to find space to store their priced old possessions or even keep their new items until they need them. This partly explains the demand for storage units across the US.
Here are other common reasons why a lot of people search “storage rentals near me“ on Google and other search engines:
- Free up space at home – Spring cleaning usually involves getting rid of things people don’t use in their homes without giving or throwing them away. Sometimes, people rent storage units to go through the decluttering process.
- Store possessions of a loved one – Letting go of the past is hard, especially when people lose a loved one. Many of them inherit entire houses full of possessions that require storage. Renting a storage unit helps slow down the process of going through the items before finally discarding or selling them.
- Create more space for business – Many small business entrepreneurs rent storage spaces for their supplies and inventory items. Pharmaceutical companies, for example, use such units to store drugs that require distribution to hospitals and doctors through their representatives.
- Move to another place or downsize a home – Self-storage is useful to those who need temporary spaces to store their belongings as they move to another place. Those who want to downsize their homes, such as Baby Boomers, could also use these spaces to keep surplus items.
- Use as off-season storage solutions – People need storage spaces for ATVs, motorcycles, boats, RVs, and other seasonal vehicles.
- Create more dorm room space – Storage facilities close to local universities stay packed. Many times, this is because the students need a place to store their belongings when they take a break for summer.
- Require temporary storage when renovating – A storage space helps keep things in the home organized during a major remodeling project.
What Do the Statistics Say?
The self-storage market had a value of $87.65B in 2019, and it’s expected to reach a high value of over $115.62B by the year 2025. This translates to a 134.79% CAGR over the said period.
The self-storage industry also occupies more than 1.4 billion square feet, with 190 million square feet were built within the last five years.
One out of every 11 Americans uses self-storage.
These numbers show that your investment in storage units is likely to grow and experience continual growth within the next few years.
Why Self-Storage Investing Is a Profitable Venture
The self-storage business model is unusual for commercial real estate properties. You can purchase or build self-storage facilities in unglamorous areas, such as the outskirts of the city center or close to noisy roads.
Tenants pay little to no deposit, and they can leave on brief notice. However, the sector is experiencing robust growth and performance that’s only slowed slightly by the recession.
Here are more reasons self storage investment opportunities are a desirable item for investors.
Retailers are now using next-day shipping to get products to their customers. These businesses require storage facilities close to their customers, which spurs the demand for the services. However, most of those renting storage spaces are residential groups.
The demand is usually from Baby Boomers looking for more storage because of downsizing and millennials who prefer to rent long-term rather than homeownership. Other groups that are demanding self-storage units are students, business owners, and the military.
The construction and maintenance costs of a self-storage facility are considerably lower compared to multi-family apartments and office buildings. You do not have to deal with tenants who live in them. A tenant moving out of your apartment means you have to invest time and money into:
- Cleaning the carpet
- Repainting the house
- Repairing damage to the property
- Redoing the flooring and carpets
When your storage unit is vacant, maintenance usually just involves sweeping that space for the next renter. Plus, technologies such as automated entry and remote-controlled systems mean you don’t have to hire a full-time manager to take care of your self storage investment.
Steady cash flow and tax benefits
A major reason to choose a storage units investment property over other commercial properties is the consistent cash flow. Storage units can provide the returns you require, especially if you intend to retire soon and are looking to create multiple streams of passive income.
Plus, you are investing in a venture that offers the most tax benefits today and later. As a self-storage investor, you can take advantage of the accelerated depreciation to offset income. Syndication deals with limited partners provide pass-through deductions that allow you to keep more money in your bank.
People don’t like change most times. For example, if your internet company says it is going to raise its rates, you will probably stick with them instead of dealing with the hassle of setting up a new system with another provider. The same applies to self-storage units.
Once people lease your units, they are not in a hurry to move out. They are also more likely to tolerate the occasional rent hikes.
If you are looking into improving your investment portfolio through diversification, consider a storage units investment property. This business is experiencing increasing demand, is recession-resistant, and provides you with many ways of investing your money based on your abilities, goals, and interests!
Now that you know how lucrative self-storage is, feel free to check out our other blog posts to gather more information about growing your business!