Self Storage Demand Continues to Grow Across the Country: Here's Why

Self storage might not sound like the most exciting commercial real estate opportunity, but it has one big advantage over other sectors—stability. As more people move for jobs, switch homes, and acquire more possessions, the need for self storage units is only growing. That steady growth and expansion is attracting interest from commercial real estate investors who are looking to make self storage a key portion of their portfolios.

Here's why the growth, low overhead, and easy revenue that self storage ownership presents is so attractive to investors.

A Growing Industry

By most estimates, the self storage industry is a $38 billion market. There's been huge growth over the last decade as construction spending on self storage unit builds has sky-rocketed from just under $500 million to nearly $5.5 billion in 2018.

There has also been demand to go along with that market growth as both people and brands are getting creative with how they use self storage space. The market has responded accordingly, offering more flexible options in new builds that are attracting a broader market.

Secondary Revenue Opportunities

For those exploring real estate investing options, self storage is unique because it provides consistent income to the owner. It's estimated that nearly 10% of the US population uses self storage units.

Since many self storage units are relatively low cost, it attracts tenants who will likely pay for the unit over the course of many months or even years. Plus, with a few small upgrades or value adds, a self storage facility owner can tap into a new market and gain additional revenue.

For example, giving tenants the option to rent a truck for moving or transportation is a practical way to meet their needs and garner extra income. Some self storage facilities also have dedicated showrooms to display the various sizes of units, and owners can cater to local businesses to attract new tenants.

Another benefit of self storage units is the relatively low maintenance costs and minimal staffing needed to get up and running. Because of this, operational costs are reasonable and the addition of amenities often don't require a significant increase in costs.

Expansion Into New Locations

While most self storage units are typically built in urban locations, there is a growing need for self storage in both suburban and rural communities as well. Due to the rising housing and transportation costs in many cities, especially those in the Northeast, a migration is taking place. Thousands of people are leaving pricier areas, including New England, New York, and New Jersey, for more affordable and rural areas in the Midwest and Sunbelt.

Such expansion outside of urban centers spells growth potential for investors. Many of the investors with self storage facilities are seeing consistent and solid revenue based on the needs of these new markets. In more rural areas, for instance, successful self storage operators offer larger units that can hold RVs and boats during the off season.

For new investors who aren't ready to jump into a new build project, already vacant properties that can be repurposed offer an attractive alternative.

A Market to Watch

It's easy to see why self storage units are an increasingly attractive and safe play for commercial real estate investors. With the growth potential rising and opportunities opening up in new markets, a self storage investment can be a safe and reliable entry point to the market.