Everyone’s feeling the pinch of the economic downturn. How is it affecting self-storage? In talking with many facility owners and feasibility consultants, I’ve come to some conclusions.
First, I still haven’t found a business investment better than self-storage. At least 60 percent of the owners with whom I’ve spoken have experienced steady or moderate increases in rental activity. They also say the clientele has changed. The tenant who rents a unit while moving into a larger home has been replaced with the unemployed tenant who rents because he’s going to live with his parents or friends. Most owners have had to use some discounting to lure tenants; many have seen a rise in delinquent accounts.
The remaining 40 percent of owners are watching occupancies slip. The largest amount of change is happening in areas that are losing population, or those that have a large glut of home foreclosures. Even the self-storage REITS have experienced a decline in occupancy of 3 percent to 6 percent, but that is minimal, again showing the strength of the self-storage investment.
There are fewer new or expanding self-storage sites developing this year. Many projects are on hold due to financing issues. While money is still available, a larger amount of equity is now required to seal the deal. In some cases, this could mean building a smaller phase or taking on a business partner. The flip side is, for the developer who does have financing, there is less competition for resources and building sites, not to mention less competition for new customers during rent-up.
One big advantage is a more favorable attitude from city and county zoning boards. In the past, some potential self-storage developments couldn’t get approval in a specific area because municipalities were picky about projects. Now, officials fear their cities will not grow, which means no new taxes will be added into the community or they may be forced to lay off staff. Consequently, they are much more receptive to self-storage development.