WHY SELF STORAGE?
THE FUTURE OF SELF STORAGE
The self-storage industry continues to be one of the most stable businesses in the United States. Currently, studies show that 1 in 10 households rent one or more storage units. As the population continues to grow, the demand for self-storage units are forecasted to grow. In addition, as Baby Boomers transition to a retirement lifestyle, Boomers will be looking to storage facilities to house their most precious possessions collected over their life time. The main sources of demand will continue to come from life-changes events such as retirement, household moves, divorce, death, and weddings. In addition, with more virtual offices and home-based business taking root, it is expected that many businesses will house their inventory in a storage facility versus paying the high price of commercial warehouses and office space.
FINANCIAL PERSPECTIVE
OPERATIONAL PERSPECTIVE
From a financial perspective, storage facilities continue to have the lowest operating expense ratio when compared to other commercial real estate. Operating costs as a percentage of income is roughly 35-40% for storage facilities; whereas, apartments, office space, and retail centers typically have an operating expense ratio well north of 50%. In addition, the default rate for loans backed by storage facilities is in the 6-8 percent range. In addition, the break-even occupancy rate for self-storage is 60-72% occupancy. This compares favorably with other forms of commercial property where the breakeven occupancy rate is 80-90%.
From an operational view point, the industry is going through a metamorphosis. The days where a storage facility owner builds a facility, sticks an ad in the yellow pages, and then watches the income come in are over. Due to the increase in demand for better customer service, customers will demand a facility that provides safety, convenience, and professional management. It is our view that customers will want to be able to not only store their valuables at a facility, but also be able to purchase locks, insurance, and procure movers through a storage facility.
