As 2022 draws to a close, I’m struck by how this year has felt like a transitional exercise. When the year started, we were still in the throes of impacts from the COVID-19 pandemic and operating under a cloud of uncertainty. Though historical self-storage performance provided much to be optimistic about, the preceding 22 months were enough to give us pause on what to expect through the course of this year.
Though the last 12 months weren’t devoid of challenges and surprises, all in all, self-storage has continued to fare as well as or better than other industries, including retail and real estate sectors. The ripples from external factors like the war in Ukraine, lingering supply-chain issues, inflation concerns, interest-rate hikes, labor challenges and more will continue to influence business, investing and development into next year, but as the weeks and months have passed, the closing to this year feels much more like 2019 “normal” than at any time I can recall since the start of the pandemic. That’s certainly reason to be optimistic heading into 2023.
I began this year by gauging the temperature on six relevant big-picture industry items, so I thought it would be worthwhile to go back through them to close out the year to see what’s cooled, stayed hot or held steady as we get ready to turn over the calendar.
Temperature Gauge: Heating Slightly
Though industry development was holding steady in January, I’d say it actually heated up through the course of the year before cooling back down to some degree. The fact remains that investors and developers continue to find pockets of opportunity nationwide, including sub-markets in otherwise saturated areas. Buyers are finding older properties with room for expansion, and many operators are getting ahead of ground-up projects by expanding existing locations.
The number of medium-sized, regional and national operators with multiple projects in their development pipelines continues to be impressive, despite ongoing municipal challenges (zoning restrictions, building moratoriums, etc.). Strategic builds, including mixed-use projects and boat/RV sites in position to take advantage of government incentives, continue to have upside.
Temperature Gauge: Cooling Slightly
We opened the year with a red-hot real estate market, which stayed on that pace for much of the year. Though there are signs that the market may be cooling, investor interest remains high, which should keep buyers and sellers plenty busy. Our monthly reporting of industry-related sales and acquisitions continues to show that facilities of all sizes are trading hands, including smaller, older facilities with room for value-added enhancements and expansion.
Inflationary concerns have persisted through much of the year, and though early 2023 forecasts for commercial real estate indicate cooling property prices and higher financing costs, well-capitalized buyers are poised to take advantage of the market. Though the pace of transactions may slow, deals will likely continue to flourish in the near term, including for small properties that aren’t listed for sale.
Temperature Gauge: Heating
We end the year, much like it began, with concern regarding the impact of unforeseen events. As I write this, a large portion of the nation was in the midst of a polar plunge and bracing for a bomb cyclone. The intensity of weather events and natural disasters continues to steadily rise, and there’s little reason to assume things will improve over the next several months. The impact of climate change on geographic areas prone to hurricanes, tornadoes, wildfires, drought and other threats makes it imperative that you carry adequate business-insurance coverage.
Make sure you have a disaster-management plan in place, with all staff well-trained on what to do in the face of a crisis, particularly with respect to filing necessary claims, communicating with vendors and tenants, and handling media inquiries.
Temperature Gauge: Holding Steady
This was an area that continued to surge through the first part of the year as operators continued to adopt contact-free practices for unit rentals and move-ins as well as implement more technology into facility management and oversight. Though the urgency for adoption from the pandemic has waned, the need to stay competitive within your market and cater to customer expectations for convenience remains high.
Our continued coverage of industry-related technology news and trends shows that vendors continue to innovate and announce deeper integrations with facility-management software. These advancements promise to become more robust and will affect a wider number of operational systems going forward. If you haven’t started to leverage elements of automation and tools that promote greater efficiency and security, now’s the time to delve into the world of innovative operation.
Temperature Gauge: Holding Steady
Barring any unforeseen developments, in-person industry events should enjoy another fruitful year in 2023. We were thrilled to return the Inside Self-Storage (ISS) World Expo back to its full, traditional format this year, as we hosted thousands of professionals during the industry’s largest conference and tradeshow.
Self-storage educational events are a great way to network, train staff and gain insight on all the latest and emerging trends. As we put the finishing touches on the 2023 show, we’re extremely excited about what we’ve got in store for you including some new twists and a new venue. As always, we’ll have a full educational slate and dynamic expo hall of product and service providers when the ISS World Expo convenes April 11-14 at the Caesars Forum Conference Center in Las Vegas.
Temperature Gauge: Cooling
Though COVID-19 case counts continue to be high, the disruptions to businesses, schools, air travel and local economies aren’t near what they were when the year began. A trifecta of COVID, flu and RSV this fall has continued to tax the health-care system, but most industries, including self-storage, have been operating as close to “business as usual” as we have at any time since before March 2020.
As society learns to live with COVID, markets and businesses will continue to adjust. The ripple effects, particularly those related to labor shortages and supply-chain challenges, will continue to be felt, though they should continue to lose their acuity. Of course, the business lessons learned from the last couple of years are invaluable in preparation for whatever the next widespread impact may be, whenever it comes.
Thus, with the winter holidays upon us and the new year just ahead, I can’t help but look forward to 2023 with cautious optimism. Economic uneasiness remains, certainly, but as we’ve learned, the self-storage model is well-suited to absorb the initial impacts of a downturn and be in a sector-leading position once things settle and turn for the better.
On behalf of all of us at ISS, I hope this holiday season is particularly joyous, and we wish you all a healthy and prosperous year ahead.