Besides being a public health crisis, the coronavirus pandemic has caused extensive economic upheaval. Uncertainty is never good for business, and the real estate industry is no exception. But one sector managed to weather the storm and even grow during the last 10 months: the self-storage industry.
This may be surprising and confusing. And it is even more difficult to know if this trend will persist. But if you are considering investing in or starting a self-storage business, having a good grasp of potential future trends is imperative.
Here are some projections we can make based on what we’ve seen this industry do in the past. It may give you the certainty you need to take the next step.
Why Is the Self Storage Industry So Resilient?
In 2019, the self-storage market was valued at over $87 billion. And it hasn’t slowed throughout 2020. In fact, it is expected to reach $115 billion by 2025, which would give it a compound annual growth rate of almost 135 per cent during that period.
At the outset of the pandemic, the expectation was that all real estate industries would suffer. And they did. Self-storage business owners anticipated people losing their jobs, and they lowered rates in order to keep customers.
But by early summer, it was clear that occupancy in self-storage facilities was holding strong. There are several reasons for this. The simple answer is that self-storage does better when more people’s lives are uncertain.
Things like increases in divorce or loss of income mean that people’s living arrangements are shifting. More people are moving or renting, and relying on self-storage. The other way to look at this is that self-storage provided very valuable service during these difficult times in people’s lives.
Anticipating Future Trends
The big question is, since we are (hopefully) moving to a post-pandemic world, won’t future trends shift the other way? Won’t more stability decrease the need for self-storage?
Possibly. But it may not be as pronounced as you might think. Consider individual aspects of these dynamics.
With many people working remotely, businesses have realized that they can make do with smaller offices. Self-storage has benefited from this shift.
But this is temporary for many businesses. Most will eventually have all their employees come back to a brick-and-mortar workplace.
But it also could mean a future where companies realize that office space for personnel is not as necessary they once thought. It could portend a shift in how companies view the necessity for in-person work. Especially when they can rely on self-storage for everything else they need to run their company.
Also, instability in people’s lives is not the only reason self-storage tends to perform well, even during economic downturns. Nor does it fully explain why the industry has seen steady growth even during times of economic growth.
Increased urbanization is a driver here as well. Growing populations means smaller and increasingly costly living spaces. This creates more renters who are more likely to move and need self-storage.
Finally, self-storage has a far lower rental delinquency rate than other real estate ventures. This affords a level of security not seen in other sectors.
Get Started in the Self Storage Business
While no one can predict the future, history can be a strong indicator of it. The stability of the self-storage industry for decades is a good barometer for gauging the future trends we are likely to see.
At Self Storage Investing, we give you all the tools necessary to succeed in one of the hottest real estate sectors today. We offer a variety of educational and training programs to help you navigate the world of self-storage. We can help point you in the right direction so that you can get involved in this already lucrative and thriving industry.