Written by Guest Columnist Larry Goldman, CCIM
Now a $22 billion/year industry, Self Storage is attracting an increasingly higher profile in the commercial investment real estate sector. Initially perceived as a temporary means of warehouse land until a higher and better use came along, self storage has elevated itself to that higher use. Currently there are 58,000 self storage facilities throughout the United States, or 2.22 billion square feet. If every resident of the United States steps inside a storage unit at the same time, we would still have extra space. It took the self storage industry more than 25 years to build its first billion square feet of space; it added the second billion square feet in just 8 years (1998-2005).
What are the key demand factors driving America’s thirst for storage space?
- Geographic mobility
- The peak in disposable earnings
- The aging of America’s population
- Businesses understanding the value of storing supplies, records and equipment off site.
Why Self Storage?
The relative ease of management attracts many investors who self-manage their facilities with direct employees, as opposed to third party management companies. Currently, less than 5% of the privately owned facilities are even managed by third party management companies.
The relatively low cost of construction further draws developers to Self Storage. Even as municipalities demand higher quality, more esthetic design, construction costs are still significantly lower than alternative property types.
Ongoing capital infusions tend to be significantly less than other types of property. Unlike other commercial properties, there are no appliances to replace, plumbing to repair, or late night calls from tenants. Unlike office and retail buildings, there are no leasing commissions to neither pay nor tenant improvements to perform as space is re-tenanted.
Self storage is now being recognized as one of the most recession-resilient commercial/investment property types by both private investors and larger institutional investors. While certainly not a passive investment, a good storage facility provides excellent diversity to a balanced investment portfolio of similar property types.
Larry Goldman, CCIM is the President of the Kansas Self Storage Owners Association. As well as owning and managing self storage, Larry specializes in the brokerage of self-storage facilities and is the Kansas/Arkansas/Western Missouri affiliate of the Argus Self Storage Sales Network, the only national network of self-storage brokers in the country. Larry can be reached at 913.339.0641 or lgoldman@selfstorage.com.