Good News for Self-Storage Facilities
The latest report from Self Storage Data Services Inc includes excellent news for self-storage facility managers and owners. The report released in June shows that demand for self-storage units remains strong, even in the midst of the current weak economy. This positive report indicates there is an ongoing market for self-storage units. It also indicates that demand for self-storage units remains sound even as demand for consumer goods falters in other sectors of consumer spending.
The newest findings from SSDS, the nation’s only source of self-storage facility performance results, calculated demand as the sum of all move-ins less all move-outs in the study period. Because performance is calculated every 90 days and this positive report is based on data from about 1,500 self-storage facilities across the United States, there is definitely good reason for an optimistic outlook for this sector. SSDS has released reliable information made up of data from more than 5,000 self-storage facilities in the top 50 US markets for over 30 years. The most recent positive report identifies the eastern region as the one with the greatest increase in unit demand but there were nearly 1 million units included in the study, suggesting the strong demand is indicative of strength in other markets, as well.
With demand strong, there is good reason to anticipate solid occupancy and the ability to increase our rates over the course of the next year. There is also reason to view the self-storage market as recession-proof to some extent. This will vary market by market and you must make yourself familiar with conditions in your specific market before initiating rental rate increases, of course, but the SSDS report results show it is worth the time spent to make this investigation. It also shows that fundamentals of the self-storage business remain strong, too. With this in mind, it’s also worth reconsidering the use of concessions and low rates to attract new customers unless an analysis of your market has shown these to be necessary. While performing this analysis, it’s a similarly good time to assess your cost structure and determine any and all cuts that can be made without sacrificing quality. You might also want to consider taking on some improvement projects or necessary maintenance programs while interest rates remain at historic lows.
The strength in demand reported by SSDS undoubtedly makes the self-storage business attractive to potential investors. As they evaluate possible business ventures, it’s important for us to remember that self-storage facilities are performing well relative to many other possible investments. This puts us in a comfortable position in most markets at the present time. It also makes us an excellent potential investment for individuals or companies looking to diversify into a business sector that can hold its own in a very weak economy. The important question for self-storage facility owners and managers is just how much can the self-storage market bear? Where is the upper limit for rental rate increases and lower limit for concessions and other marketing programs? Given that there is a difference in the strength by market, the conclusion can only be that owners and/or managers must take a close look at the particulars of their market, either through an analysis of their own or with data from the SSDS site, before making decisions in areas that impact the fundamentals of the self-storage business.
All in all, the SSDS report indicates there is reason to take a measured approach to pricing increases and the use of concessions when attracting new customers or maintaining your current customer base. There is also reason to assume continued strong demand as the economy remains weak and to view your business as one which will remain profitable even as other sectors of the economy continue to not do as well. Self-storage facility owners, managers, and investors are in a pleasant position at this time. Our self-storage units continue to attract customers and potential investors. It is up to us to bear this in mind as we structure our priorities, plot our business strategy, and give our attention to the day-to-day management of our facilities.
Scott Meyers, CSSM© is the President and Owner of Indianapolis Based Alcatraz Storage™. He is also a national speaker and trainer in the field of Commercial Real Estate and Self Storage Investing through his company SelfStorageInvesting.com. To reach him, or to invite him to speak, call 866-693-5999; e-mail Scott@SelfStorageInvesting.com; or find him online by visiting www.SelfStorageInvesting.com