In today’s post, I want to start a series of posts on the topic of self storage.
2020 has been a tough year for most industries and businesses due to the forced economic closures to slow the spread of COVID-19. Once the governments allowed the economy to open back up, a large percentage of the population did NOT go back to business as usual. For this reason, I have always wanted to focus on real estate that had dynamics to the business that would allow this type of real estate to survive any type of recession and possibly even excel during a recession.
Over the years, the self storage category of real estate has demonstrated its resiliency to overcome economic disruptions. The self storage industry did experience decreasing street rates at the beginning of the pandemic with national average rates decreasing 2.6% month-over-month in April. But in June, the industry started seeing signs of a reversal in that trend. In June, month-over-month data showed slightly more positive performance for the street rates and that started to offer some hope to the industry that worst was already past it.
Through July and August, we have seen a continuing reversal of that early downtrend. The street rate performance across the country continued to show improvement during August of 2020. Most local markets were showing increases on a monthly basis and more markets are seeing positive growth on an annual basis. The data I’m looking at in 2020 shows a potential slowdown in new storage development activity. This slowdown combined with street rates starting to show signs of increasing could be a relief for many investors in the self storage industry.
So, despite everything going on in 2020, the self storage industry continues to prove its resilience during an economic recession.
I will continue to post more content on investing self storage assets including coverage of the competitive environment, rental rates and growth patterns, typical costs and operating expenses, site selection and construction considerations, supply and demand factors and management issues.