Self-storage is a niche real estate sector that accommodates storage needs generated by a diverse set of demand drivers including life changes such as death, relocation, moving, and other milestones. More than 50% of Public Storage’s tenants have been there 12 months or more but overall, the business is characterized by a level of tenant turnover around 60-70%+/year. This heightens the importance of efficient property management, marketing, and pricing strategies in an operationally intensive business.
U.S. self-storage has grown rapidly over the past 30+ years;. First-generation facilities were unattractive single-story drive-up “rows” located far from main residential and retail areas. Today, the most profitable storage facilities are located near high-traffic retail and residential areas and offer greater “curb appeal”.
The U.S. Consumer-driven economy combined with recent population shifts toward urban cores is what drives Urban Storage Fund’s focus on premier urban markets in the United States. The U.S. Population is predicted to reach 400 million by 2050 and in a cross-generational U-turn, people of all ages are returning in large numbers to the urban centers their parents or grandparents left behind a half century ago.
Many smaller operators lack resources and expertise to develop urban infill self-storage product while large, publicly traded self-storage companies lack the agility and entrepreneurial vigor to execute new urban development.
Demographic Migration Characteristics
- More than half of the nation’s 51 largest metropolitan areas saw greater population growth within city limits than in their suburbs between July 2010 and July 2016.
- Baby Boomers and Echo Boomers comprise more than 50% of the U.S. Population. These two groups are now moving into the two largest renter-demographic age ranges of 18 to 30, and 55 and older.
- Increased demand for urban housing at a time when the average apartment size continues to decrease to historic lows, necessitating the need for self-storage
- Severe shortage of institutional quality self-storage product in many high density urban markets.
- Virtually no new supply added to the existing self-storage inventory in recent years.
- Exceptionally high occupancy rates and rising rental rates mean higher exit valuations for self-storage properties.
Cultural Traits & Demographic Shifts Favor Urban Storage Development
Since the mid-20th century, the U.S. has had a consumer driven economy. In other words, Americans buy things. This very American character trait has been the driver of industries that make, sell, deliver or repair what Americans need or want. It is also the driver of the self-storage industry because the “stuff” that Americans buy accumulates, increasingly beyond their capacity to store it in their homes.
This acquisitive U.S. cultural trait has merged with recent population shifts toward urban cores to drive Urban Storage Fund’s focus on premier urban markets in the United States.
Self-Storage Investment Opportunity
- Self-storage industry has outperformed all other major commercial real estate asset classes over the past 10 years, regardless of real estate market cycles and economic climates.
- Self-storage was deemed the best U.S. investment in the past decade by Bloomberg Riskless Return Ranking.
- Self-storage produced the best risk adjusted return among 10 U.S. real estate investment trust indexes in the past decade.
- Self-storage also had the highest total return and the third lowest volatility in the Bloomberg ranking.
- Facility count has increased from 6,600 in 1984 to nearly 50,000 as of 2012
- In 1996 fewer than 6% of households rented a storage unit. As of 2012 the percentage has grown to over 9%
- Nationally, at year-end 2012 all self-storage facilities employed more than 172,000 persons, or an average of 3.5 employees per facility
U.S. Self-Storage Geography