One in ten U.S. households now rent a self-storage unit. The growing demand for self-storage in the U.S. is created by people moving (some 40 million people move each year according to U.S. Census data), and by various lifestyle transitions, such as marriage, divorce, retirement, a death in the family, etc. Recent surveys of self-storage companies indicate a positive trend in market demand and occupancy rate
The increased demand for storage space outside the home includes the larger number of apartment dwellers who do not have any storage space for their increasing amount of possessions–usually household goods, and outdoor recreational equipment. For many years, facilities functioned as transitional solutions to moving, marrying or divorcing, or a death in the family. Now the self-storage units are used to store not only household items but cars, RVs, motorcycles, snowmobiles, boats and trailers, and all kinds of recreation equipment. Many areas do not allow recreation equipment to be parked in driveways and yards, so the self-storage units are the perfect solution to this problem.
Self-storage facilities rent space on a short-term basis (often month-to-month, though options for longer-term leases may be available). Nearly all jurisdictions prohibit the space from being used as a residence or business. Businesses use self-storage usually for storing excess inventory, equipment, or archived records that would normally occupy high-cost retail space.
Some facilities offer packing boxes, locks, and packaging supplies for sale to assist tenants in packing and safekeeping their goods.
The rented spaces are secured by the tenant’s own lock and key. Self-storage facility employees do not have casual access to the contents of the space (and, thus, the facility is generally not liable for theft). A self-storage facility does not take possession or control of the contents of the space unless a lien is imposed for non-payment of rent, or if the unit is not locked the facility may lock the unit until the tenant provides his/her own lock.
It wasn’t until the 1960s that storage facilities took off in the United States. The first facility using garage-style doors was built in Odessa, Texas in 1964. The building was created for the oil industry so that they could have quick access to tools and supplies. Soon after, the whole country followed suit and facilities began popping up all over.
Self-storage facilities (originally known as mini-warehouses) are relatively new investments compared to apartments, office buildings, retail or industrial. There has been an increased demand for space, with the number of people using self-storage having increased at a pace faster than population growth.
For these reasons, the percentage of the population using self-storage is likely to rise, perhaps substantially. If the percentage of the population that uses self-storage increases by only one tenth of a percent per year, an additional 30 million square feet will be required each year.
The high profit margins for self-service storage operations result from minimal operating expenses–the units require practically no maintenance. It is not as vulnerable to depreciation as other real estate because of the simplicity of design.
One large negative for investors is the ease of getting into the business. Self-storage is relatively inexpensive and easy to build. While overall supply-demand is favorable, certain areas may have excessive supply.
The average tenant in self-storage stays for a shorter time than tenants in other rentals. It can be good in a strong economy but can cause sharp drops in cash flow during recessions.
A Typical Self-Storage Unit
The typical self-storage facility usually has several rows of single-story buildings containing individual units of different sizes with roll-up doors. Unit sizes range from five feet by five feet (like a walk-in closet) to ten feet by 30 feet, enough space for several rooms of furniture or a car. The average unit size is about 100 square feet and the average property contains about 350 units. It is difficult to give average income per square feet because it will vary so much across the country.
Many buildings are more than one story. About ten percent of the units are two-story or higher, usually in dense urban areas where land costs are high and sites are scarce. The advantage of more units on less land is offset in part by the need to make all units inside ones, requiring elevators, freight lifts and stairways. Inside units do provide added security and also permit climate control of all units. The outside units have the benefit of drive-up access.
There is usually a metal fence or concrete wall around single-story facilities. Modern facilities have advanced security systems including video surveillance, individual door alarms and some means of electronic gate access such as a keypad or proximity card.
Effectiveness of management is most important to the success of the facility. Most have full-time resident managers overseeing operations. They usually live on the grounds of the facility and have an office on the premises.