While most industries have experienced a period of downsizing or recession, the self-storage industry is one exception. Its steady growth has continued to spur new investment during recessions, the Great Recession, and COVID-19. Rising prices and inflation are also likely to drive more people to self-storage, increasing its demand and appeal to consumers. But why is self-storage a need now? Let’s explore some of the reasons.
Demand for Self-storage
According to U.S. News and World Report, self-storage facilities are a good investment during recessions. The reason is that Americans accumulate a lot of stuff. In addition to millennials, many renters have moved from one house to another. In addition, smaller rentals have less space than large homes. Recessionary periods may lead to a rise in consumer spending, and demand for self-storage facilities may rise.
Another factor that drives demand for self-storage is natural disasters. The recent COVID-19 pandemic has displaced many people. While natural disasters are not a significant source of demand for self-storage space, the resulting damages and displacement from homes are often enough to increase the need for self-storage space. Additionally, landlords are legally prohibited from evicting tenants, which is good news for this asset class.
Recessions have an adverse impact on businesses, but the self-storage industry has proven itself resilient to economic fluctuations. Its healthy cash flow and robust demand make it a safe haven for investors and property developers during a recession. The downturns are never pleasant, but they can be an opportunity to capitalize on opportunities and increase profits. And with the economy improving, demand for self-storage facilities will continue to grow.
The COVID-19 pandemic has also caused a disruption in the housing market. Real Capital Analytics reported that commercial real estate sales volume dipped by over five percent in the third quarter of 2011 compared to the same period the year before. As a result, investors are turning to self-storage as an asset class in recession-proof markets. So, what does the future hold for this asset class?
During a recession, consumers downsize their homes to fit smaller spaces. Despite their decreased needs, stagnant wages and bleak employment conditions lead to downsizing. While these households may no longer have the space to house all of their possessions, they still require additional storage space. Self-storage facilities benefit from the downturn by increasing their rental rates. In fact, self-storage facilities often experience higher rental rates during a recession.
Facilities Need Utility Capacity
To avoid paying too much for utility bills, facilities should consider investing in high-quality commercial mop buckets. These mops have a squeeze mechanism, which is much more efficient than the cheap models you’ll find in the supermarket. Also, energy consumption is a huge expense for self-storage facilities, so it’s imperative to perform regular preventive maintenance to keep utilities low. Make sure the thermostats are locked to prevent tenants from adjusting the temperature themselves.
Before you begin construction, you should determine how much utility capacity your self-storage facility needs. A self-storage facility’s utility capacity should be determined by analyzing how many people will be living in and around it. A typical facility with 60,000 square feet of space won’t be full, even if there are 25,000 people within five miles. To make sure you’re not overbuilding, seek professional advice from a self-storage consultant.
As the millennial population continues to grow, so too does the demand for self-storage services. Millennials demand a technology-rich and responsive experience from any business they interact with, including operators. Self-storage businesses are evolving to meet the needs of this growing customer segment. For example, the San Francisco self-storage company Store Space recently tested in-store kiosks to augment in-person customer service. The concept proved so successful, that it became a permanent business model.
In order to meet the demands of Millennials, self-storage operators should adopt an omnichannel marketing strategy and have a presence on various platforms, including social media. Millennials and Gen Z respond well to personalized experiences and messaging. According to a Pew Research Center study, Snapchat, Instagram, and TikTok were the top three most popular social platforms among this group of consumers.
In addition to Millennials, Gen Z is the largest demographic group on the planet, with a combined income of $7 trillion dollars. Bank of America predicts this group will be worth $33 trillion by 2030. That’s 27% of the world’s population. They will influence consumer products and marketing trends, as they are the youngest generation. With a large portion of the generation having finished college, the housing decisions of this generation will begin to accumulate large purchases. And as they do, the demand for self-storage will increase accordingly.
Millennials are highly skilled and educated. They also value collaboration and teamwork over individual activity. Millennials also are impatient and overvalue their contributions. Millennials are also prone to creating special management styles. In organizations, this means embracing the Millennial mindset. If the Millennials can’t find their way around, they will not be satisfied with the existing model.
Cost of Self-storage
The cost of self-storage properties has gone through a drastic change over the last decade. While construction costs have increased dramatically in recent years, the rate of new facility development has dropped. In addition, supply chain issues have made it harder to build new facilities. Steel prices have risen more than 200% since the last recession, and construction labor is now more expensive than ever. The bigger the unit, the higher the price, but a smaller space costs less per square foot. Demand for storage is a major factor in price, as is the cost of acquiring land or building a facility.
There are many factors that determine the cost of a self-storage unit. Location is a major factor, with units on the first floor of a building or near an elevator or ramp being more expensive. The type of unit also plays a big part in the price, with indoor facilities typically costing more than outdoor units. Another factor in the cost of a storage facility is the facility’s age. Newer, multi-level facilities command a higher price than older, outdoor facilities.
Operating costs vary considerably, but overall, they are usually significantly lower than the costs of land and construction for similar buildings. In fact, self-storage costs can range between $23 and $28 per gross building square foot, and they account for 67 percent of the development budget. In addition, construction costs include utilities and site work. A self-storage facility can cost as much as $6 million. This amount, however, depends on the type of product the owner has in mind.
Prices vary widely, but for a 5′ x 5′ climate-controlled unit, you’ll pay an average of $65 per month. Ten-by-ten-foot units can cost up to $138 a month. A self storage hemel hempstead offers an affordable price range too. If you’re storing a lot of things, a larger unit will cost you upwards of $300 per month. When looking for a storage facility, it’s best to do some research to determine which size is right for you.