Tracking Self-Storage Growth: Is Your City Seeing More Supply?
The self-storage industry is amid an unprecedented development cycle with the construction value put in place nearly three times the prior peak. In the quest to avoid overbuilding, it’s imperative to understand where new competition is entering the market.
February 15, 2018
The self-storage industry is amid an unprecedented development cycle with the construction value put in place nearly three times the prior peak. In the quest to avoid overbuilding, it’s imperative to understand where new competition is entering the market.
The self-storage industry added 791 new facilities in 2017, double the number of new stores developed in 2016. Looking at net rentable square feet, the country grew 1.3 percent and 2.7 percent in 2016 and 2017, respectively. The top 50 markets grew even faster, accelerating to 3.8 percent.
Texas leads the industry growth with three markets in the top 10. Five markets have experienced double-digit supply growth over the last two years.
1. Austin, Texas – 9.5 percent
2. Raleigh, N.C. – 8.4 percent
3. Denver– 7.8 percent
4. Boise City, Idaho – 7.7 percent
5. Dallas – 6.2 percent
6. Milwaukee – 6.1 percent
7. Pittsburgh – 6.1 percent
8. Washington, D.C. – 6 percent
9. Orlando, Fla. – 5.9 percent
10. Houston – 5.8 percent
Track Demand
According to a survey by online marketplace SpareFoot that reached 12,000 self-storage customers, migration is the key to storage demand. The study showed that 68 percent of demand revolves around “life events.” These events result in a change of residence—migration—while the other 32 percent of respondents use storage for “extra things.”
Migration is essentially the changing of residency due to life events of one sort or another. When we track migration, as opposed to population growth (birth rates, mortality rates, immigration), it will lead to a better understanding of what direction self-storage demand is headed in any given area.
There are two metrics that have been proven to accurately track job-relocation migration: labor-force flows and nonfarm payrolls. Labor-force flows track the gross number of people changing jobs, while nonfarm payrolls showcase the total number of paid U.S. workers, which is a key metric in understanding what drives labor-force flows.
Tracking migration and, in turn, nonfarm payroll growth, is the key to uncovering self-storage demand. Having a better understanding of what drives this demand will benefit everyone in the self-storage value chain.
Keep an Eye on What’s Been Built
In recent years, lease-up times for a new self-storage facility had compressed to as little as one year in many regions. As the market starts to digest the 2016-17 deliveries, we’re seeing lease-up times extend to three years or more. Because of this, it’s just as important to track deliveries over the last two to three years as it is to track development projects in planning or under construction.
Understanding what already exists in a market as well as what’s in the pipeline will ensure storage professionals make the right decisions when it comes to developing new facilities.
Cory Sylvester is principal of Union Realtime, which uses technology solutions to deliver self-storage data and analysis. Its technology provides the industry with the most accurate self-storage development supply information available, and now provide that same accuracy with self-storage occupancy data along with market reports and self-storage statistics. The information is updated daily. For more information, e-mail [email protected]; visit www.unionrealtime.com.
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