Now Is a Good Time to Build Self-Storage

Terry Campbell Comments
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Conventional wisdom has taught those in the self-storage business that while the business isn’t recession-proof, it’s certainly recession-resistant. That said, self-storage is experiencing the impact of the current downturn for two reasons:
  • Too many people seem to have a passive, “wait-and-see” attitude toward the economy, rather than the usual aggressive stance we saw even a year ago.
  • Forces outside the business are having an impact beyond the control of potential investors and existing owners.

However, even under these circumstances, self-storage is still a viable business. In spite of the naysayers, there are strategies you can employ during uncertain times to ensure success. In fact, the smart investor knows how to turn a negative situation into a positive one.
 
Act Now

During tough times, some people look for opportunities to actually make money, while others are losing it or trying to break even. For example, some investors buy up depressed stocks or commodities during a recession, hold onto them until the economy improves, and then sell them at a substantial profit. This is a sound strategy, if you have enough discretionary money to participate, and if you’re in no hurry to make revenue.

Then there are instances in which a recession creates circumstances that are beneficial to certain businesses, if they are poised to take advantage of them. This is precisely what’s happening in self-storage today. There are compelling reasons for those not in the business to take the plunge now and for those already in the business to expand.

Building materials and land costs. The uncertain economy has forced building prices lower than they’ve been in years. If you consider materials costs are one of the single largest expenses an owner will incur in building a facility, you can assume bargains simply don’t come along except in unusual times. And you can bet these are unusual times.

The same can be said for the cost of land, although it will vary depending on location. Land costs in some areas of the country continue to appreciate; some are holding steady, but most continue to fall. Therefore, on balance, there are bargains to be had.

Finding financing. Even though interest rates are low, banks are requiring higher down payments. This is a problem for some investors because they have to come up with more upfront money than in previous years. But there are ways to get around this through partnerships. In other words, there is strength in numbers.

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