Ready to make an investment in self-storage units? Great! As you likely know, it’s essential to carefully analyze the market before making any investments; this will help ensure that you select the best possible opportunity.
If you’re a capital owner looking to invest in self storage, understanding the dynamics of the housing market and local supply and demand are important components of your evaluation. But where should you begin? What other factors should you consider when analyzing the market for self storage investments?
In this post, I will provide a step-by-step guide to analyzing the market for self-storage investments. We will cover topics such as supply and demand, population demographics, and local competition—all of which are key considerations when making your investment decisions. Let’s get started!
Understanding the Self-Storage Market
The self-storage market is booming, and it’s no wonder why. With sales volume increasing 180 percent from the year prior, reaching a whopping $23.6 billion in 2021, it’s clear that investing in self-storage units has become increasingly popular. In the span of five years, an impressive 253 million square feet of storage space has been added to the industry, with a global self-storage market size valued at USD 58279.16 million in 2022. Plus, the industry records an annual revenue of more than USD 39 billion. All signs point to a bright future for this lucrative market, with projections that the global self-storage market will reach a value of $71.37 billion by 2027.
If you’re considering investing in self-storage units now is the time to do your research and analyze the market and its potential return on investment. From understanding population demographics around potential storage locations and researching local competition to analyzing supply and demand trends—this post will provide you with all the information you need to understand and make informed decisions about investing in this growing industry.
Analyzing Supply and Demand in Self-Storage
When it comes to self-storage investing, analyzing the local supply and demand of the market is critical to making good decisions about buying or building a storage business. To accurately assess the market, you’ll want to consider both factors simultaneously.
Recent data indicates that demand in the sector is stabilizing after a Covid-induced surge. With more people transitioning to working from home, there has been a huge spike in items needing storage space. Currently, the supply of self-storage units is insufficient to meet this surge in demand.
Once you have an understanding of the supply and demand landscape in your local area, you can make an informed decision about what type of storage facility is needed and how much space should be allocated for each unit size. You should also consider population demographics when evaluating potential investments – as people move into an area or their needs change, they may require different types of storage solutions. This will give you valuable insight into the type of services that are needed in your area and help you determine which investments are most likely to succeed.
Examining Population Demographics for Investing in Self-Storage
Understanding who needs self-storage is key to understanding the market and predicting the future of investing in self-storage. Knowing your target demographic can help you make more informed decisions when it comes to finding the right location and investing in a particular market.
Did you know that an estimated 65% of self-storage renters are from Generation X? This means that if you are looking to invest in a new self-storage unit, you should consider targeting locations with large concentrations of Gen Xers. Other important demographics include the median age, number of households, and percentage of people renting or owning their homes.
On average, there are about 14 people for every self-storage unit in the US. This high population density indicates that there is an increasing need for extra storage space due to rising urbanization. It also means there is a higher potential for profitability since more people require self-storage services. Additionally, women make up 65% of all renters—this means marketing campaigns for self-storage investments should be tailored towards women as well as men.
Assessing Local Competition in the Self-Storage Market
It’s important to analyze the competition when you’re looking into potential investments. After all, you don’t want your investment getting crowded out by a company operating in the same market as you. So here are some key things to consider when evaluating local competition in the self-storage market:
Number of competitors
The first thing to assess is the number of competitors in the area you’re looking at. The more competitors there are, the harder it will be for your own self-storage unit to make money, as those competitors will be taking away business from you.
Quality of competition
It’s not just the number of competitors that matters, but also their ability to compete. Make sure you do your research into each competitor and determine their strengths and weaknesses. Are they offering a better service than you will be? Or is their pricing too low for them to remain profitable? Knowing this information can give you an idea of how much competition there really is in an area.
Fragmented industry
The self-storage industry is highly fragmented, meaning that many companies are involved – which can actually be beneficial if it means more customers in a certain area. The key here is figuring out if those customers are willing to pay the rates your self-storage facility would charge them for their storage needs. This can be determined by researching customer feedback for other companies in the area and seeing what they have to say about prices and services offered.
Evaluating Risk When Investing in Self-Storage
When it comes to analyzing any real estate investment, risk assessment is key. When evaluating the risk of investing in self-storage units, there are a few key factors to consider.
Supply and Demand
To assess the supply and demand of self-storage investments, you’ll want to look at population growth, job market trends, and other socioeconomic factors in the regions being considered for investment. If there’s an ample supply of units in the area, that could mean there’s a higher risk of vacancies. On the other hand, if the demand for self-storage is increasing faster than new units are being built, then you might have found an excellent investment opportunity.
Vacancy Risk
Self-storage investments tend to have less vacancy risk than other asset classes like office or retail investments because people always need additional storage space. To reduce vacancy risk further, look for diversification opportunities where possible—namely by investing in multiple self-storage facilities or multiple unit sizes. That way your cash flow won’t be too heavily weighted on any one unit type or location.
Finding Opportunities in the Self Storage Investment Market
Another important step when analyzing the market for self-storage investments is identifying opportunities. This means you need to look at the supply and demand dynamics in the local areas you’re interested in, as well as any other potential revenue sources.
Supply and Demand Dynamics
When looking for potential self-storage investment opportunities, it’s important to evaluate the population growth of a certain city or region, as this will have an impact on demand for self-storage units. Additionally, it’s also important to assess how much competition there is from other storage units in the area and how occupancy of those units is affecting pricing.
Other Potential Revenue Sources
Self-storage investments can be made through real estate syndication or REITs (Real Estate Investment Trusts), which often have several potential revenue sources such as retail space leases within the facility, insurance sales, and truck rental services. All of these are great ways to increase returns on your investment, so it’s important to analyze these sources carefully before proceeding with a particular opportunity.
In summary, finding opportunities in the self-storage investment market requires careful analysis of supply and demand dynamics as well as other potential revenue sources like retail space leases and insurance sales. By taking some time to research these areas thoroughly before investing, you can ensure that your next self-storage venture will be a success!
Conclusion
Self-storage investing can be a lucrative way to build wealth, as long as you take the time to analyze the market and create a thoughtful strategy. It’s important to look at the supply and demand for storage units, research the population demographics and local competition, and consider the tax implications of investing in self storage.
If you’re considering investing in self storage, don’t rush into a decision without a complete understanding of the market. Take the time to do your research, analyze the market, and build a comprehensive strategy before diving in. With thoughtful planning and a bit of luck, self-storage investing can be a powerful way to build and protect your wealth.
