Basics Of The Self Storage Market
Self storage businesses exist to offer their customers a safe place to store household goods, business materials, vehicles, and anything else that the customer needs to stow away. Consumer and business-facing self storage facilities are seeing tremendous growth- almost 10% of American households use a storage facility each year. Currently, the sector is generating over 20 billion dollars in revenue, with roughly 50,000 storage facilities in the US and total rental space of more than 1.7 billion square feet. This growth in storage facilities has not gone unnoticed by the media. Numerous storage-based reality shows like Storage Wars dominate television networks, and the self storage facility has profoundly entered the American cultural lexicon.
All of this growth has attracted investors, big and small, with the majority of facilities still being in the hands of individual owner-investors- all though there is a move towards consolidation in some larger markets like SF, NYC, and other high cost of living regions. The property class is not what you think of when you think of commercial real estate. Most people think of gleaming skyscrapers or McDonald’s locations- not storage facilities that sit in industrial areas on the periphery of town.
Global Self Storages Mark Winmill Sheds Light On Whats Driving The Sector’s Strong Growth
Image courtesy of Global Self Storage
More than a year into the pandemic, demand for self storage continues to be strong. Despite an initial dip at the onset of the health crisis, rents bounced back in May, exceeding pre-pandemic levels. And while experts predicted a slowdown in development activity, the new-supply pipeline remained steady, underscoring robust investor appetite in the sector.
In the interview below, Mark Winmill, chief executive officer of Global Self Storage, discusses the current state of the storage sector and provides insights on whats driving the industrys growth.
READ ALSO: Will Self Storage Prosper After COVID-19?
How has Global Self Storages portfolio performed so far in 2021?
Winmill: Global Self Storages operational and financial performance has been strong. In the first quarter of 2021, our strong pricing power and lease-up performance generated record same-store occupancy and revenues, with double-digit percentage growth in funds from operations and adjusted funds from operations.
In the first quarter of 2021, total revenues increased 9 percent year-over-year, to a record $2.4 million. Same-store occupancy increased 470 basis points to a record 96.1 percent in March 2021 from 91.4 percent in March 2020.
As a self-administered and self-managed Real Estate Investment Trust, the company now owns or manages 13 properties with 969,100 square feet of total leasable space.
What are some new trends that have emerged during 2021?
Investor From Charlotte North Carolina
, consider a EDDM or Every Door Direct Mail campaign to market your self storage units. Here are a few benefits:
1. Inexpensive way to saturate a localized area and get your marketing messages directly into the hands of consumers
2. Does not require a postage permit
3. You have full control in terms of the drop date
4. No list needed. Records are targeted by geographic region
5. Lots of option in terms of the size of your mailing piece i.e. 6.5×9, 8.5×11 and tri-fold 4.25×14 Larger postcard=more eyeballs/attention
Welcome to the wonderful corner of Real Estate with huge cashflows, and without the hassles of tenants, toilets, and trash! I have owned several facilities and over 2,500 units through the years. I have found the best traction I get is by having a site built specifically to allow clients to rent once they visit the site ours here at www.ClermontStorage.com built by the Storage Group. By the way, it is always best to own the domain in which the city is located: i.e. springfieldSelfStorage.com, DetroitSelfStorage.com……
Also, the aggregators are by far our #1 source for paid traffic. We use and recommend to all our students that they sign up with Sparefoot.com or UsStorageSearch.com.
Beyond that, we post Craigslist ads, network with realtors, apartment complexes, and at the Chamber of commerce – pay the $250 and go to the meetings.
Cheers and keep us posted of your success!
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What About Self Storage Near Me
A note about near me searches: theyve skyrocketed in popularity the last six years. Why?
As long as your site loads quickly, works great on mobile devices and develops increasing authority through quality backlinks, it will rank for relevant searches, including near me queries. Lets put it another way keyword optimization is not the low-hanging fruit here.
Also consider the adoption of new business segments such as portable storage, valet storage or concierge storage and how that affects your business. You might be able to expand your business to include valet storage. Or perhaps you can get ahead of competition by creating a financial model that shows why more traditional self storage is still the right fit for your target audience.
The Hometown Advantage And Self Storage
One of my favorite examples of using qualitative information to find a new target market and comes from my hometown. I had the pleasure of meeting a new owner-operator whose facility sat between Pulaski, New York and the larger Syracuse area market.
Due to the rural nature of his location and several years of mediocre management, Chris facility didnt have the year-round occupancy levels he had hoped. We opened up his Syrasoft reports to look at the numbers.
Immediately, we saw the Occupancy History report was showing two fairly substantial annual spikes. These peaks in occupancy went back several years before Chris purchased the property. One spike occurred in the spring and the other in the fall.
I happened to be familiar with that area and knew the region is a hotspot for seasonal outdoors activities. I asked Chris if he knew what tenants stored during two different seasons. The facility had been making use of Syrasofts customizable demographics questionnaire. Chris, being an avid snowmobiler, had added the Snowmobile option available in the questionnaire under Why did you need a storage unit?.
After reviewing the demographics reports we saw the spike in spring move ins was due to snowmobiles being placed into storage for the season. What was missing was why so many tenants moved out a few weeks later.
Taking the time to specifically record what the Other category also revealed enough motorcycles and small vehicles to warrant action as well.
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Find Out Economic Occupancy Information
In the self storage sector, occupancy is denoted by two categories: economic and physical occupancy. For example, a given facility may have 90% physical occupancy, but that same property may only have 55% economic occupancy. The discrepancy between the two represents the difference between actual and potential income and profits from each unit. So if a facility has a high physical and low economic occupancy, some tenants are likely paying below-market rates through existing contracts or tenancies. Economic occupancy is critical when obtaining self storage financing, and thus is a major driver of market pricing.
Be aware that rental rate risk is often decreased in self storage facilities, due to the fact that they rely on lower occupancy levels compared to other commercial RE asset classes. For a typical storage facility, the breakeven occupancy rate to service standard debt is roughly 45%. That percentage for retail, office, and commercial spaces can be 65% or more. After a self storage facility is acquired and stabilized, they tend to weather recessions much better by holding value and recovering quickly during economic distress.
You Can Retire On $600k On Dividends Alone
Seaside portrait of old man
It was a hoot to see Barrons run a cover story about retiring on dividends. But I have a bit of constructive criticism about the piece: the dividend stocks highlighted in the feature article had yields too low to actually retire on.
The magazines 10 buys included Coca-Cola JNJ and had an average current yield of 4.1% between them . That means youd need just under a million bucks to generate a $40,000 income stream in retirement.
Sure, dividend growth will inflate the yield on your original buy, but Barrons didnt exactly pick companies that are rolling out accelerating dividends here. IBM, for example, yields a decent 4.8% as I write this, but it raised its quarterly payout by a mere penny a year ago, and its payout growth was slowing even before the pandemic.
Kellogg Company , another pick, yields just 3.7%, and its payout is flatlining, too…
And Ive written before about AT& T T , the biggest yielder of the Barrons 10-pack, which pays a nice 6.9% today but never raises its payout more than a penny a yearand it hasnt even done that since it last announced a hike, in December 2019.
DISH Network , which plans to build its own 5G mobile network, with startup set for the third quarter of this year.
But back to retiring on dividends. The spirit of the piece was spot-on, and it was well written and argued. And Im glad to see the press finally talk about an idea weve been pushing for years.
A 3-CEF Mini-Portfolio Paying 6.7%
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Isnt Your Financial Advisor Helping You With This
This is exactly what a fiduciary financial planner is forto figure this out with you . If youre paying somebody who only manages your money or sells you products, it may be time for a change. Reach out if youd like to talktheres no obligation, and we can just chat. I do not sell anything for a commission, I provide ongoing or one-time advice for clients, and I can work with people in Colorado and other states.
If you dont yet work with a financial advisor, consider the benefits of doing so. You can spend your time and energy on other things, and an experienced professional can help guide you through lifes inevitable changes. Plus, a study from Schwab Modern Wealth showed that having a plan can increase your retirement confidence and help you develop healthy financial behaviors:
- 56% of people with a written financial plan felt very confident about their goals
- Only 17% of respondents without a plan felt very confident
There are many ways to work with an advisor, and things may have changed since you last spoke to a financial planner. For example, its easier than ever to work with somebody for one-time financial planning or pay a flat fee for advice. Its understandable if youve had bad experiences in the past, and there are still plenty of advisors out there who are painful to work with, but things are changing.
Self Storage Facility Occupancy
|National average occupancy||92%|
The national average self storage occupancy rate in 2018 was 91.7%. While this roughly 1% lower than the year before, occupancy rates have continued to increase since their 75.7% low in 2010. Rates have stayed above 90% since 2015 and are expected to remain above this threshold for the near feature. The prior high of 89.9% was in 1994.
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How Much Can You Potentially Make Owning A Self
Self-storage business income will vary depending on the size and location of the business, as well as the number of years its been in operation and its profit margins. According to Move.org, standard storage units rent for an average of $60 to $180 per month. Climate-controlled units rent for between $75 and $225 per month. Units range in size from 5×5 feet to 10×20 feet, with the larger units commanding the higher prices. If units are in high demand, a business can increase its prices, particularly during popular times like at the end of the summer.
Tools And Resources For Investing In Self
This article is by no means everything you need to know about investing in self-storage. It’s simply a resource to help you understand how you can begin investing in self-storage and how this industry works in general.
If you’re looking for additional resources, a great place to start is your state’s local Self-Storage Association . Continue reading about self-storage investing, and begin searching websites for current facilities for sale to get a feel for the local market and buying process.
This industry can be extremely lucrative and a great, low-maintenance way to invest in CRE, but it is not without risk. Make sure it’s the right business for you before investing.
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Is Self Storage A Successful Investment
One of the best ways to compare real-estate investments is to look at the performance of self storage and other real-estate investments during the past decade. Recently, my company completed an in-depth study of the performance of multifamily, office, retail and self storage developments in Texas, Oklahoma, New Mexico, Colorado and Louisiana over the past 10 years. The study focused on the failure rate of those developments that opened between 1980 and 1987 and were operating during the economic recession that began in those states in the mid-1980s. The results of the study are as follows:
- Multifamily = failure rate of 58 percent
- Office = failure rate of 63 percent
- Retail = failure rate of 53 percent
- Self storage = failure rate of 8 percent
The number of self storage properties that ended up for sale in the FDIC or RTCs real-estate portfolio were substantially less than other real-estate properties during the same time period. Of this 8 percent in self-storage failures, a considerable number of businesses were taken back by financial institutions because they were collateral for loans on other real estate.
Why is there a substantial difference in success between self storage and other real estate? What are the key elements that give self storage the extra edge for surviving tough economic times? The first thing an investor must understand is what happens to the end userresidential and commercial customersduring the swings in a markets economy.
Can You Retire On $500000
In simple terms, planning for retirement is a numbers game. Many experts recommend saving at least $1 million for retirement, but that doesnt take your individual goals, needs or spending habits into account. In turn, you may not need anywhere near $1 million to retire comfortably. For instance, if you have $500,000 in your nest egg, that could be plenty for your situation. In the end, the amount of funds youll need for retirement is completely personal to you. If you have specific questions about your retirement plans, a financial advisor can help.
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Choose The Right Place To Retire
Your retirement savings might not be worth much if you blow 80% of it on buying a condo. But if you move out of the city and relocate to a small town, you might easily be able to afford a place for under $200,000. You might also field a smaller property tax bill and enjoy the affordability of a small town. From a financial perspective, relocating to an affordable town is an ideal retirement move.
Its important to take your retirement needs into account before relocating. It wont be financially savvy to move to a small town if you have to drive every day to a nearby city for your retirement activities.
Public Storage Operators By Revenue
Public Storage tops the list of public storage operator with quarterly revenue of over $2.8 billion USD in Q3 2019. Extra Space Storage , who has been experiencing above average revenue growth in the last few years, comes in second place with almost $1.3 billion. Cube Storage and Life Storage have remained in third and fourth place, although they continue to be neck and neck with less than a $100 million difference in revenue in Q3 2019.
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How Much Does Seo Cost And What Should I Spend
Storage is a competitive industry with several companies competing for the same customers.
We have many packages available, and pricing varies depending on how competitive your area is and your SEO goals.We want to help you make informed decisions about your storage needs. For a free video audit, contact us today!
Go Local Interactive Wins The 2020 Inside Self Storage Best Of Business Award For Marketing
Go Local Interactive has won the Best Marketing Services category for the third time in Inside Self Storages Best of Business Awards.
We are excited to announce that we have been chosen as a winner of Inside Self Storages Best of Business Awards for 2020! Were proud of the extensive work weve done with self-storage companies to establish customized and effective marketing strategies to increase their revenue. Inside Self Storage is the leading source of information in the self-storage industry with multiple educational offerings to its professional community. The Inside Self Storage annual Best of Business awards highlight the top product and services suppliers in over 35 categories.
We are pleased to be recognized by the storage industry for our ability to provide marketing solutions that increase rentals and revenue for our storage clients, said Michael Solms, Go Locals SVP of Sales and Marketing. This award reinforces our brand promise, which is to always provide marketing recommendations based on both solid data and the knowledge of our passionate team of experts so that we continually remain worth our clients investment.
Go Local Interactive will be featured in the August print edition of Inside Self Storage magazine.
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