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Self-Storage: Still the Best Investment

Everyones feeling the pinch of the economic downturn. How is it affecting self-storage? Our author says it's still a great time to invest in the storage business.

July 8, 2009

3 Min Read
Self-Storage: Still the Best Investment

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.

New Opportunities

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.

This may give you the advantage to get through the approval phase what was once considered an “impossible” project. Take advantage of this situation as best as you can, and build that facility you’ve always wanted.
The Cost of Construction

The other reason now is a great time to build is the costs related to development or construction have declined. We’ve seen a substantial decrease in the cost of materials including steel, concrete, paving and other building components. Land costs have come down in many areas due to the sluggish real estate market.

The decrease on construction volume makes resources more available and affordable, which can mean higher-skilled labor at better prices and shorter lead times. When you take into account the changes in development costs, a project that last year was marginal may now be feasible. In addition, hiring a general contractor is easier, and fees have also been trimmed.

Taking all this into consideration now is a great time to find that good location, build your facility, and be in position for the economic rebound you know is going to come.

Jamie Lindau is the national sales manager for Trachte Building Systems in Sun Prairie, Wis. Lindau has crisscrossed the United States and Canada for 23 years helping people plan, develop, build and profit from self-storage. Drawing from his own experiences as a former self-storage owner, he has also led more than 200 Trachte seminars since 1988. For more information, call 800.356.5824; visit www.trachte.com.

Related Articles:

Seven Myths of Self-Storage Development and Operation

Now Is a Good Time to Build Self-Storage

Got Dirt? Adding Space to an Existing Self-Storage Facility

Building Self-Storage: Creating a Harmonious Design Team

Basics for the First-Time Self-Storage Owner

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