When the Covid-19 pandemic first hit, the markets were jumpy. What would happen? Which industries would go to the wall and which would thrive?
Price volatility can wreak havoc on the unprepared entrepreneur. While many businesses succumb to the drop in demand, others have been buoyed by rising demand during adverse conditions. One industry that has thrived through the pandemic has been self-storage.
Self-storage through the pandemic and other disasters
During a pandemic or most other conceivable collapses of civil society, one industry that will almost certainly remain profitable is self-storage facilities. Self-storage facilities are appealing for multiple reasons, but especially because of the affordability, availability, and security.
Self-storage facilities offer a number of benefits not available with other means of storage. They are generally more affordable than traditional storage units, even in bad economic times. Rent for standard-sized units is about $100-$300 per month on average. The prices range depending upon the size of the unit and the location of the facility.
Macabre as it may be, storage companies often refer to the four D’s; Downsizing, Death, Dislocation, and Divorce. Unpleasant as they may be, they are part of reality.
In the spring of 2020, fear was rampant across the nation, and the impacts were felt in several waves in the self-storage industry, with upticks in demand and, therefore, in profits.
To begin with, students were sent home from universities. Some students opted not to lug all their possessions home or found that there was no longer space at home for them, and so they moved their property into storage.
At the same time, workers were asked to work from home, and both businesses and employees came to realize the benefits of this arrangement. Many organizations opted to downsize their main offices, placing surplus equipment into storage in case of future needs. Meanwhile, those employees able to work from home have begun to move from the cities and towns, heading for lakeside properties or spaces in the mountains or open plains of the continent. These moves also resulted in a surge in short and long-term storage needs.
Businesses closed their doors permanently, or at least for the foreseeable future, but some owners opt to store their products and equipment for brighter days. We certainly hope as many as possible are able to fulfill that desire, but in the meantime, the storage requirements are great for the self-storage industry.
Death and divorce also reared their ugly heads. Divorces rose due to couples finding themselves trapped in close proximity than they were used to and the subsequent toll this took on their relationships. Death, of course, remains the grim reality in this Covid-19 pandemic, with relatives needing to store possession as homes are sold or repossessed.
Self-storage hits the headlines
The New York Times wrote that “Occupancy rates are at record highs, drawing investors and entrepreneurs looking for growth opportunities,” while the Wall Street Journal reported that “uncertainty about whether to stay put, move, or just clear out the junk motivated new customers.”
The self-storage industry is currently worth $39 billion, while across the board, other industries have seen significant money wiped off the face of the Earth. A similar story occurred through the 2008 housing crash and recession, where self-storage emerged as the only real estate investment trust category to show a positive return.
The future of self-storage post-pandemic
This sharp rise in self-storage refinance and the use is only the beginning. With the profitability of almost double of its nearest competitor, Apartment buildings, self-storage is a secure investment opportunity for savvy entrepreneurs.
Human nature is to hang on to the majority of our possession rather than strip out the unused items. As such, in times of trouble, consumers will opt to store their possessions rather than dispose of them. However, it doesn’t all need to be doom and gloom to turn a profit in the self-storage industry. In times of prosperity, storage is often needed for overflowing purchases or for storing worldly possessions while venturing out on global adventures.
What’s next for Self Storage and Refinance?
The self-storage market has seen some recent turbulence, but it remains strong overall. Regardless of the economic situation, self-storage looks well-positioned to continue making investors some significant profit.
If you are interested in investing in large commercial real estate projects, self-storage may be a wise option for you, given how lucrative self-storage properties can be. National Self Storage Association (NSSA) members reported an average occupancy rate of 87% in 2008. While there have been dips in occupancy along the way, rental rates continue to rise.
One reason for this success is location. The NSSA states almost 95% of US households live within 15 minutes of a self-storage facility. This means even during an economic slowdown, people will still be storing their goods.
Why Self Storage?
Self-storage is versatile, generally offered with short one-month lets, and can be used as an emergency measure for anyone who has experienced displacement due to flooding, property damage, divorce, or anything you can think of.
When the economy regains its strength and people can afford to commit to creating small businesses, self-storage offers an affordable warehousing option for short to medium term, while business finds its niche in the market.
The self-storage facility is a stable investment for your portfolio. As long as the goods are retrieved when tenants move out, this type of storage will remain profitable for years to come.
It’s also worth noting you can diversify your investments with several different types of storage units in the same location, such as climate-controlled units and drive-up storage.
So, if you’re looking to diversify your portfolio and make a big return, self-storage may be the perfect option for you.