ISS BLOG - 4 Self-Storage Markets That Show Great Promise and Why We Support Investment There

Self-storage use has steadily increased over the past three decades, prompting a flurry of development and investing activity. However, while the asset class is lauded for its resilience, selecting the right market in which to build or buy remains critical. Regional employment as well as income and population statistics provide part of the picture, but it takes a deep understanding of local dynamics to assess whether a facility will succeed.

My company is constantly scouting for promising self-storage markets. Even when an investment business like ours is pursuing aggressive growth, it’s crucial to balance scale with the ability to endure. We’ve learned to apply strict criteria when vetting potential acquisition and development opportunities.

Metrics such as income and growth, along with the presence of major employers, are clear markers of a region’s progress. You can also gauge market strength by researching the per-square-foot rental rate for storage, which might be as much as double the national average in undersupplied areas. Population-growth rates and residential-development trends provide additional insight to an area’s potential, as both tend to correspond with an untapped appetite for storage units.

To pinpoint the self-storage opportunities with the greatest potential, you must consider every aspect, from local employment statistics to market saturation. Based on their alignment with the metrics above, we’ve identified the following four territories as prime candidates for acquisition and development.

Central Florida

Central Florida boasts many of the qualities that are attractive to self-storage developers and investors, including record population growth, strong rental rates and significant unmet demand. Between 2010 and 2019, the state’s population grew by approximately 2.4 million people, the highest net gain of any U.S. state.

Orlando is at the center of that activity. A beloved tourist destination, “The City Beautiful” is anchored by its thriving aerospace, defense, healthcare, hospitality and technology industries. Major employers include AdventHealth, Disney, Lockheed Martin and Universal Orlando Resort. However, while the city’s population is increasing at a rate of 1.45%, many residents are being priced out, creating a sweeping regional pattern as they move north to smaller communities like Eustis and Gainesville.

Georgia

Atlanta and Savannah are experiencing substantial population growth. In fact, Atlanta's populace is expanding at a rate of 1.42%, according to Macrotrends, a research platform for investors. Savannah is growing by 1.18%, which is still more than double the national average.

As the fourth-largest container port in the U.S., Savannah is undergoing significant expansion, making it a gateway for international trade. It’s home to distribution centers for prominent companies like Hyundai, IKEA, Target and Walmart, which is drawing thousands of new residents.

At Spartan, we’ve capitalized on these trends by investing in 19 facilities across Georgia, solidifying our footprint in the region.

Pacific Northwest

Brands such as Amazon, Microsoft, Nike, Starbucks and T-Mobile have cemented the Pacific Northwest's reputation as a hotspot for innovation and development. With its high population density and sustained growth, the region has a strong, built-in customer base for self-storage.

Portland, Oregon, and Seattle are favorites among young professionals who relocate in search of solid job prospects and a vibrant place to live and work. The median household income is $85,876, while Seattle's is $116,068, according to Data USA. Both cities rank among the top 10 most fiscally fit in the country, and “Forbes” lists Seattle and Portland as the first and fifth best places for business, respectively.

Texas

Texas is second only to Florida in net migration rates, and heavy hitters such as Apple, Dell, ExxonMobil, Oracle and Sysco maintain a strong presence there. If it were an independent nation, Texas would rank among the top 10 economies in the world, beating out countries like Australia and Russia.

The Dallas-Fort Worth metropolitan area is the embodiment of this growth. With robust financial services, technology, transportation and aerospace industries, it’s one of America's most diverse economies. Between 2022 and 2023, more than 150,000 new residents settled in the metroplex, according to an article by an NBC affiliate for the area. It’s the largest population jump for any U.S. metro.

Spartan owns and operates more than 20 sites in Texas. It’s our largest footprint in any state.

Harnessing Opportunity

Self-storage is a business driven by life events. Identifying the markets in which a facility will thrive is all about tracking the demographics of the people living and working there. By analyzing the behaviors of potential customers and the companies that employ them, you can home in on the areas poised for growth. This allows you to anticipate peaks in demand, ensuring you’re in place to deliver additional inventory when and where consumers need it most.

Ryan Gibson is cofounder and chief investment officer of Colorado-based Spartan Investment Group, a privately held real estate investment firm specializing in the self-storage industry. He’s responsible for the company’s investor relations and capital raises. To connect with him, email [email protected].