Here’s Why Self-Storage Is a Billion-Dollar Industry that Just Keeps Growing
Investing in self-storage real estate is a way to own a piece of a billion-dollar industry that just keeps growing—with no end in sight. Alreadyin the United States, we have seven square feet built for every American, totaling 2.3 billion square feet of self-storage nationwide.
The building continues. The reasons self-storage demand remains strong are part demographic, geographic, economic, and psychological. Here are the key drivers behind the non-stop growth of self-storage.
- Accumulation of a consumer society. Since the end of World War II, Americans have enjoyed growing prosperity, with rising incomes and decreasing cost of goods. Real disposable income doubled between 1970 and 2008. American families have nearly twice as many possessions today than they did 25 years ago. Once people acquire things, they are unwilling to part with them. One of the most popular uses for a storage unit is as a place for things people “no longer need or want.” Instead of throwing unwanted things out, people pay to store them. One consultant explained that people think “I paid $1,000 for that table,” so they don’t want to throw it away or sell ii for $20 at a garage sale. They don’t want to admit the thing is essentially worthless. Into storage it goes.
- Urbanization and the rising cost of real estate. While people are acquiring more and more things, they are living in smaller and smaller spaces. People are moving to the city and to smaller homes. The spacious attic, the open basement, and extra space in the garage are storage space luxuries many people no longer have. Half of storage unit renters say they use their unit for things that no longer fit in their homes. You may think that the doubling of the average home size would mean more storage space, but the design of new homes eliminates attic space, with finished basements leaving no room for junk.
- Inertia and laziness. Once people own something, they are strangely reluctant to part with it. And once someone loads up their storage locker, they tend to just keep their stuff there. The leader of one storage market consulting firm explains that people spend a day moving stuff into the locker, and then turn the key. As long as they feel they can afford to keep paying the [storage space] rent, “they’ll leave that stuff in there forever.” It seems that once things are out of sight, they are out of mind—and that translates into profit for self-storage space owners collecting the rent.
- Downsizing baby boomers. As baby boomers move from homes into retirement communities or smaller condos, they become a market for self-storage space. They may store heirlooms, mementos of their children, cherished collections, and more. Adult children living in small apartments often don’t want the stuff. The storage unit has become the great American attic.
- Mobile population. Just like the song says, “Doesn’t anybody stay in one place any more?”
- Storage locker for small business. Entrepreneurs often need extra space for merchandise when just starting out. Small home-based multi-level marketing business owners also need space. People who make a living selling on ebay, Poshmark, and Etsy often need inventory space. Still, a booming small business might have too much inventory to keep at home. That’s where a storage locker comes in. Self-storage can work as a warehouse and an order fulfillment center. Other types of small businesses can store equipment in storage units. A lawn-care company can store mowers and an event company can store tents, tables, and chairs. While most local ordinances do not permit you to use a storage unit as an office or manufacturing site, it can play a critical role in small business operations.
- Economic disruptions. The lockdowns and economic impact of the COVID-19 virus is driving up demand for self-storage. The owner of a hair salon not be able to keep up with rent can use self-storage for saving valuable equipment and inventory to re-install in a new location when the economy comes back to life. A worker in one city might take a job in another city with a better economy for a year or two, leaving possessions in storage. All of the impacts of the “mobile population” trend above are magnified now. Even after COVID-19, many industries are going through tectonic change, creating life disruptions that become self-storage demand drivers.