The Self-Storage See-Saw

Drew Whitney Comments
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What goes up, must come down, right? Some feel that the real estate turbulence of late was bound to hit at some point, because it had soared to such great heights in the past several years. How far it would drop was anybody’s guess.

While editing a piece on self-storage finance this morning, I did a little research and came across an alarming headline on CNNMoney.com: “Foreclosures spike 112%, with no end in sight." If that’s not enough to make stomachs turn, the lead paragraph should do the trick: “One out of every 194 U.S. households received a foreclosure filing in the first three months of 2008, according to the latest figures released Tuesday by RealtyTrac.”
 
Not too many folks can take comfort in those numbers, but what may cause a sour stomach for some might just render itself as relief for those in the self-storage industry. That was my feeling after I opened an e-mail from fellow editor Amy Campbell, who passed along a link to yet another article. This one, from The New York Times real estate section, told a different story for our specific industry, revealing the silver lining to my blog today:

“The four real estate investment trusts that together own and operate about 12 percent of the facilities nationwide—most of the other properties are mom-and-pop operations—has soared about 31 percent, on average, this year through Thursday, after finishing 2007 with a nearly 25 percent loss.”
 
The reason, the article states, is likely linked to the foreclosure statistics; forcing homeowners to find a suitable, safe environs for their belongings once they’re squeezed from their residences bodes well for self-storage. Other people might just postpone buying a home until the rates are more savory, needing storage space in the interim.
 
According to Michael Knot, senior analyst for Green Street Advisors, self-storage holds great promise for investors and, naturally, for owners/operators as well. “It is recession resistant,” he is quoted as saying in the NYT article.
 
And so it seems, while some have predicted the industry was out for a frenzied rollercoaster ride, others like to look at it in terms of simple playground physics: Self-storage is still looking pretty, sitting on the high side of the economic see-saw.
 
P.S. Thanks for the tip, Amy!

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