Self Storage growth in the USA amid economic downturn
January 2009 - As foreclosures and tightening budgets lead people to downsize their living spaces, some people are moving their valuables into self-storage facilities, as seen in the current US self storage market.
As foreclosures and tightening budgets lead people to downsize their living spaces, some people are moving their valuables into self-storage facilities, as seen in the current US self storage market.
Charles Ray Wilson, president of Self Storage Data Services Inc., says the self-storage industry should continue on its “smooth road of solid performance considering its strong fundamentals.” His research company, which tracks self-storage trends, says rent per occupied square foot of self-storage in Detroit — one of the USA's softest real estate markets as measured by home foreclosures — hit bottom in the fourth quarter of 2006, but rent for self-storage has since increased 18%.
The self-storage market across the US is, however, starting to show signs of weakness due in part to the prolonged housing crisis and deteriorating economy. Third quarter rent per occupied square foot declined 3% nationwide. Declining home sales pose a risk to the self-storage industry, says Wilson, because “fewer sales translate to few moves, and it’s the moves that create the demand for storage.”
Chances are you or someone you know has used self-storage at some point — nearly one in 10 U.S. households currently rents a self-storage unit, according to the Self Storage Association of America, an industry trade group. Primary self-storage facility gross revenue for 2007 was about $22.1 billion, says the Self Storage Association.
Public Storage’s spokesperson Clemente Teng says demand for self-storage business is driven by such life events as a divorce or junior moving back home to mom and dad.
That said, rising foreclosures have benefited self-storage companies. “Maybe your ARM reset and you have to give up your condo but don’t want to throw out your huge plasma TV. You store it for $75 a month instead,” says Paula Poskon, senior research analyst at financial service firm Robert W. Baird & Co. Poskon says most consumers who use self-storage believe their circumstances are short-term and solvable.
Public Storage’s average new customer typically stores goods for about 8 months. The price consumers pay per square foot of storage varies by factors such as the location of the unit (storing in NYC is probably going to cost you), the unit size and its features (such as climate control). Teng said the most common storage size for his company is a 10×10 unit with an average price of $1.50 per square foot.
The Wall Street Journal
December 23 2008
