In today's volatile investment landscape, investors are constantly on the lookout for stable assets that offer consistent returns. Among the numerous investment options, self-storage stands out as a compelling choice. Let's delve into the reasons why.
1. A Growing Demand Curve
The self-storage industry has witnessed a steady growth trajectory over the past few decades. According to the Self Storage Association, there are approximately 50,000 self-storage facilities in the U.S. alone. The self-storage industry has grown by almost 8 percent each year since 2012 and last year’s annual revenue was valued at $39.5 billion, according to IBISWorld’s Storage and Warehouse Leasing Industry report. 1 in 11 Americans uses self-storage and pays an average of over $90 per space to rent it. This growth is fueled by various societal factors, including urbanization, downsizing, and the increasing need for space in densely populated areas.
2. High Margin, Low Operational Costs
One of the standout features of self-storage facilities is their low operational expense ratio. Industry data suggests that these facilities typically maintain an operating expense ratio of just 25%-40%. This lean operational model ensures that a significant portion of the revenue generated is retained as profit.
3. Flexibility in Rental Rates
Unlike traditional real estate assets that often involve long-term lease agreements, self-storage facilities predominantly operate on a month-to-month lease basis. This flexibility allows facility owners to adjust rental rates in line with market demand, ensuring that revenues are optimized. At All Purpose Storage, our self-storage brand ranked Top 10 in New England, over 70% of customers are on autopay month to month allowing us to adjust rents to market with 30 to 60 days notice.
4. Diversified Income Streams
Typically properties have 100 to 400 or more units rented to a diverse clientele ensuring a steady flow of income. From homeowners looking for extra space to businesses requiring storage for inventory, the customer base is varied and consistent.
5. Resilience to Economic Fluctuations
Historical data indicates that self-storage facilities tend to remain stable even during economic downturns. For instance, during the 2008 financial crisis, while many real estate sectors faced challenges, self-storage facilities saw increased occupancy rates.
6. The Mom-and-Pop Advantage
Interestingly, over 80% of self-storage facilities are owned by individual or small-scale operators. This presents a significant opportunity for organized players and investors to consolidate and optimize these assets, leading to increased profitability.
7. Economies of Scale
Unlike single-family homes or individual real estate units, self-storage facilities offer economies of scale. Managing a large facility with multiple units is often more cost-effective and efficient than managing multiple individual properties.
8. The Inflation Hedge
As tangible assets, self-storage facilities offer a hedge against inflation. With the rising cost of goods and services, the value of real assets, including self-storage units, tends to appreciate, ensuring that investors' capital is protected.
Conclusion
Mordor Intelligence predicts the self-storage market will exceed $115 billion by 2025 making self-storage one of the fastest-growing sectors of the US economy.
The self-storage industry, with its consistent demand, low operational costs, and resilience to economic fluctuations, presents a compelling investment case. For investors looking for stable and consistent returns, self-storage facilities offer an attractive proposition.
At Patriot, we recognize the immense potential of self-storage facilities as a robust investment avenue. Our deep industry knowledge, combined with our commitment to delivering value to our investors, positions us uniquely in the market. Investing in Patriot's Commercial Real Estate Funds provides investors with the opportunity to tap into the lucrative self-storage sector.
Next Steps: Interested To Learn More or Invest In Commercial Real Estate?
If you would like to learn more about our Open Funds or invest in Commercial Real Estate please contact our investor relations team by completing the New Investor Form here (it will take less than 2 mins).
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