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Is the Self-Storage Industry Overbuilt?

Andy Hyde Comments
Posted in Articles, Development
Many real estate pundits claim the self-storage industry, which thrives on storing people’s clutter, is in danger of being cluttered itself. The perception stems from many reasons, the most dominant being that self-storage—having few infrastructural requirements—is easier to start up and requires less capital than other kinds of real estate investments.

Thus, many small, independent, investors obtain low-interest capital from lending institutions, enter self-storage proprietorship in large numbers and are perceived as saturating the market on the supply side. This rapid influx of new businesses worries those established in strong markets, even more so than other concessionary variables such as discounted rental rates and occupancy levels.

Evidence of robust growth in the industry, which soared from approximately 23,000 units in 1994 to today’s estimate of 47,000, also indicates to analysts the market is in danger of becoming grossly overbuilt.

The fact the industry has doubled in growth over the past decade has earned it much attention from a number of publicly traded self-storage REITs, which control nearly 10 percent of existing facilities and are predicted to continuously consolidate the industry. While it’s unlikely REITs will over-consolidate the market in the near future, it’s reasonable to assume their presence institutionalizes it against the influx of smaller, self-owned entities that dominate and fragment self-storage.

The Big Picture

While the upsurge in self-storage ownership raises concerns about overbuilding, research paints a different picture. It’s easy to see in a pie chart that market equilibrium by Metropolitan Statistical Area (MSA) shows only 30 percent of all MSAs have been qualified as oversupplied based on current market conditions, whereas 33 percent are at equilibrium and 37 percent are undersupplied.

In short, we find more instances of undersupply in the industry than oversupply, indicating more room for industry growth. In addition to analyzing data by MSA, potential investors can examine concentrated regions in undersupplied and oversupplied states before determining where and how to build self-storage. Undersupplied states include Pennsylvania (e.g., Scranton, Philadelphia, Wilkes- Barre, Harrisburg, Carlisle) and New York (e.g., Buffalo, Niagara Falls, Albany, Poughkeepsie). Texas is an example of a state significantly oversupplied.

Clearing the Clutter

Like other commercial real estate investments, self-storage requires a keen understanding of demand. While analysts make comparisons between self-storage and apartment property sectors because of similar lease terms and operating leverages, investors must comprehend detailed lifestyle factors governing demographics in potential areas.

Also affecting market stability are macroeconomic factors such as U.S. consumerism and the increased popularity of Internet portals such as, which allow consumers to simply sell off their goods instead of storing them.

This understanding of changing trends in the industry, as well as constant attention to general economic fluxes, gives self-storage owners the upper hand in their investments.

Analysts have unduly cluttered their minds with perceptions the industry is overbuilt, probably based on the rate and speed of industry growth, not actual saturation of industry supply. Potential investors can certainly hold onto a sense of hope there is literal, measurable room for industry growth. 

Andy Hyde is director of business development and a broker affiliate for Self Storage Brokers of America, which specializes in nationwide brokerage services for buyers and sellers of existing self-storage facilities and development sites. For more information call 856.429.6789; e-mail; visit  

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