Are There Enough Storage Facilities to Meet Rising Demand?
When it comes to commercial real estate, like self-storage facilities, it’s important to know that you’re investing in something that meets current and expected consumer demand. An oversaturated market can mean more competition and lower rental rates, while an underserved market may present an opportunity for new facilities to thrive.
What does the current demand for self-storage look like, and how does it compare to the number of facilities operating across the country? Let’s take a look.
How Many People Use Self-Storage Facilities?
Current estimates put the number of households using self-storage facilities at around 10%.[1] That’s about one percent more households than we saw using facilities prior to 2020. While a one percent difference may not sound like a lot, it actually equates to an additional 1.2 million households.
This means that in total, around 12,360,000 households rent self-storage space.
How Many Self-Storage Facilities Exist?
There are currently about 50,000 self-storage facilities in operation across the United States.[2]
While secondary markets have popped up across the country as more of the population migrates to rural areas, growth in self-storage facilities has historically occurred in or around metropolitan areas. This was evident In 2020, when we saw the greatest market growth in large cities including:[3]
New York, NY
Phoenix, AZ
Dallas, TX
Miami, FL
Chicago, IL
Demand for self-storage has risen, but it’s worth noting that the number of facilities available has remained relatively consistent. As with many other industries, construction slowed in 2021 and 2022 across the country because of supply chain issues and material and labor shortages. In 2021, the self-storage industry saw about $3.75 billion spent on new construction, which was a 19% decrease from 2020.[4] It’s possible that as the economy moves toward recovery, construction may pick up again across many industries, including self-storage.
Why Is Demand High?
Over the last several years, the economy has been impacted by a number of factors: ongoing issues with Covid-19, geopolitical conflict in Ukraine, high inflation, supply chain issues, and labor shortages. Yet, as is evident by the increased number of users, the need for self-storage facilities remains strong and continues to grow.
There are several reasons why demand is expected to remain high. The growing popularity of remote work has allowed people to downsize and/or move away from large cities. This alone prompted a sharp increase in self-storage use throughout 2020.
Even those who didn’t experience significant lifestyle changes during the pandemic are still finding plenty of reasons to use self-storage facilities — many of which have nothing to do with the economy.
Self-storage facilities may be used to store a college students’ belongings over the summer or serve as temporary storage after a family member has passed. When people get married, divorced, or combine households, they need extra space to manage their belongings. These are all common reasons why people use facilities, and they’re much more dependent on someone’s stage of life rather than the greater economic cycle.
What Does High Demand Mean for Self-Storage Investors?
More households are using self-storage, yet new construction is not rising at the same rate.
Consistently high demand suggests that the need for self-storage is likely to continue growing even with the chance of a recession. A classic case of low supply and high demand, this creates an opportunity for investors. The industry is experiencing a slowdown in new construction, giving current facilities the chance to reduce their vacancy rates and raise rent — especially when new investors get involved.
A rise in demand is a great thing for interested investors, as it helps improve the probability of a self-storage facility acquisition yielding favorable returns.
Interested in Investing with Belrose?
The outlook for the self-storage industry remains positive, which means this may be an ideal time to get involved. As always, we’re here to provide additional resources and share upcoming investment opportunities through Belrose. Feel free to send us a message anytime.
Sources:
[1] Self Storage Demand Study 2020 Edition
[2] U.S. Self-Storage Industry Statistics