Industry Outlook for 2008 : Self-storage long-term forecast remains optimistic

Self-storage long-term forecast remains optimistic

Steve Ekovich
02/01/2008

Investor interest in self-storage assets continues to intensify as strong fundamentals and solid returns lure buyers who traditionally sought other property types. The self-storage market has also demonstrated resilience in times of fiscal decline, while posting solid gains throughout economic resurgence.

Short-term concerns have arisen, however, stemming from the weakness in the housing market, the slowing economy and significant increases in new supply. Nonetheless, the long-term outlook remains positive, as favorable demographic trends are expected to provide a spark in the demand for storage space in the years to come.

Supply-and-Demand Factors

A slowdown in the national economy has caused some weakness in self-storage demand over the past year. Employment growth, the credit crunch and housing woes continue to weigh on the economy and, when combined with the slowdown in the housing market, have resulted in a slowdown in demand for rentals. A reduction in migration-generated demand due to weakness in the housing market is expected to limit improvement in occupancy levels in all but the strongest job markets. This trend could be partially offset by homeowners facing foreclosure in some previously overheated, high-priced markets.

Over the long term, further demand for storage space will be driven by baby boomers downsizing and the growing population of people over age 65, which may instigate migration to retirement locales. The 65-and-older population is expected to increase by 2.2 percent in 2008, the highest growth rate in seven years. In addition, this age cohort is expected to expand by an additional 12.6 percent in the next five years.

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