Self-storage investment has been said by experts to be “recession-resistant” due to its performance in the last economic recession.

As the country goes through a downturn in the economy, investors are looking for more ways to increase capital gains. Through this venture for higher capital gains, investors are turning to Self-storage investment as a potential asset. Its reputation of high yields and potential resistance to recessions gives it promise.

It started in the 1960s, so it is relatively new; however, the market is large and ever-growing. With revenues steadily increasing every year, self-storage has paved a steady path for investing potential.

Self-storage is one of three asset classes that is essential and attached to real estate. Many self-storage places that started off as mom-and-pop places, though large companies have been breaking through. Even so, the industry is highly fragmented. However, when larger companies began to flood the market, business practices elevated, quality of real estate improved, as did operating efficiency.

Self-storage has traveled a long way. What was once a secret in the industry turned into a growing industry due to public reporting requirements and growing institutional ownership. Today, publicly traded self-storage REITs have been in the top-performing sectors, with a promise of delivering dividends and stock appreciation. Due to this, the industry has been considered by Wall Street analysts to be “recession-resistant” from its performance in the last economic recession.

This is most likely due to the ever-increasing demand for self-storage. As people downsize their houses, or rent out their bigger houses and move into a smaller one, the need for storage in order to house extra items such as furniture, storage bins, and other household items increases.

HERE ARE SOME KEY FACTORS WHY SELF-STORAGE INVESTMENT CAN BE A LONG TERM “RECESSION-RESISTANT” INVESTMENT ASSET.

SELF-STORAGE OVERVIEW

There are different classes of self-storage. Some properties are built specifically for self-storage; others have been converted from warehouses, car dealerships, or more. The properties are usually one-story, though multi-story self-storage units are becoming more popular. They offer access via elevators and hallways. These properties rent units out, are often in different different size configurations, on a monthly or short-term basis. Below are the different types of storage:

1. OUTDOOR BAY / DRIVE UP

   This is the first generation of self-storage. It contains rows of storage buildings with outdoor roll up doors that are accessed by vehicle. There is minimal security, save for padlocks and a security system. These types of self-storage units are usually the least expensive to rent.

2. CLIMATE-CONTROLLED

   These are facilities that offer climate-controlled and humidity-controlled spaces in their properties. This type of self-storage unit has become increasingly popular, as people want to store their many items without the risk of mold and mildew forming on documents and furniture. People are willing to pay a premium for this.

3. SPECIALTY STORAGE

   Specialty Storage is for those who need it. It can be offered in part of the facility, or all, and is used for storing boats, cars, wine, art, and documents.

4. MIXED-USE

   Self-storage facilities may increase revenue by incorporating retail or office spaces for lease. They may also operate complementary businesses at the same time, such as truck-rentals or pack-and-ship franchises.

WHAT’S DRIVING SELF-STORAGE DEMAND?

Population growth is spurring as self-storage properties remain a destination property. As people actively look for self-storage units, the properties don’t need to have a high-profile location. One thing to remember, though, is that customers prefer convenience. As a result, investors are looking at properties more strategically as they look for properties closer to their customers, and try to outmaneuver their competition. Self-storage does well in densely-populated areas, such as New York or Chicago, as well as up-and-coming cities that are experiencing population and job growth.

Next, American consumerism is driving demand. People buy a lot of material things, and they do not want to get rid of it – leading to a sort of hoarding situation. As garages fill up with material belongings with memories attached, people start looking for other ways to store their things.

Finally, people who are transitioning homes will need storage space to store their things. Like it was mentioned earlier, people are starting to move out of their bigger houses, moving into smaller houses, and renting out their bigger homes to others in order to make extra revenue. Self-storage has also profited from people being displaced from their homes as they move to new areas for new jobs. This is where moving trucks and pack-and-ship services begin to pay off. College students and members of the military are often the demographic that self-storage companies look for.

WHAT ARE SOME CHANGES TO SELF-STORAGE ASSET?

The main way that self-storage has changed dynamically is in how the locations are developed and used as well as how they are operated. For one thing, self-storage properties were usually located on the outskirts of a town or city, tucked away in the back of industrial parks. However, self-storage has recently moved to urban centers where they can be in close proximity. This allows for customers to safely store their materials and gear, and following the trends according to need successfully.

Competition in self-storage has definitely changed the way it is designed. Storage operators are pushing harder for retail locations to stay close to their customers – and to do this, they must upgrade their image to attract customers and satisfy city building and zoning requirements in those retail locations. Now, the “no-frills” storage experience is being amplified with upscale designs and using a retail-friendly atmosphere to attract their customers.

Technology has also been a huge change. As technology becomes more advanced, more facilities are able to use technology to help their customers. Such examples are using a software to track renter history and issue alerts to late payers.

WHAT THIS ALL MEANS FOR SELF-STORAGE AS AN INVESTMENT

Investors are realizing and recognizing self-storage investment as a potential cash-cow. Self-storage investment is known for generating a solid amount of revenue, and it has a lean operating strategy that is easy to handle, in most cases. Self-storage investment has lower costs associated with tenant turnover as there are no broker fees or tenant improvement dollars necessary to market units to new users. There is also the fact that the units are all reusable, making for an unmatched adversary when it comes to capital gains.

One thing that investors must look for, however, is the increase in expenses to build said self-storage buildings. It is far more expensive to build than in previous generations. However, if one looks at the logistics of the overall venture, it can ultimately lead to gains and dividends