Of course, REITs are traded, which means they’re more affected by the equity markets than the underlying value of the real estate, and cannot be compared to privately owned real estate. But the relative sector performance speaks volumes.
So what does that mean to self-storage? Indeed, many owners are simply watching and waiting, holding onto their cash-flowing properties until the market shifts. On the other hand, some investors are seeking opportunities, analyzing key markets with strong demographics. In addition, we’re seeing signs of distressed properties that will offer prime buying opportunities in the next 12 to 18 months.
An Oasis in a Recession?
Clearly, the financial markets are undergoing a great deal of strain given the over-leveraging that has occurred over the last few years. This de-leveraging process has caused many financial institutions significant pain. If we take a look at our economy, there are only a few areas not directly affected by the downturn in the market.
Developers, builders, homeowners, commercial property owners, hedge funds and private equity are all taking a hit. Unfortunately, it might take a long time before we truly hit bottom. There are few glimmers of a recovery right now.
The good news is the self-storage market offers recession-resistant traits. There are a few signs of weakness in some markets but, overall, the sector is performing well. While no industry is immune to a down economy, this asset class is quite stable.
According to the National Bureau of Economic Research (NBER), specific start and end dates for each recession are determined by the gross domestic product (GDP), employment, industrial production, retail sales and other factors. NBER states these determinations are often made more than a year after the fact; however, a commonly used alternative definition of a recession is two consecutive quarters of shrinking GDP. Some forecasters say we have been in a recession for a year already and the GDP growth will return, albeit slowly, by the end of this year.