Americans love their stuff.

So much so that ​​investors ​are ​putting ​their ​money ​into ​self-storage ​as ​a potentially ​reliable and ​high ​yielding alternative ​investment.

Why ​is ​self-storage ​thriving ​these ​days?

In both good and bad markets, people need storage. It’s often thought of as a must-have rather than a luxury item. So ​whether ​it’s not wanting to give up that old record collection or holding on to cherished furniture when downsizing into a smaller space,​ ​self-storage ​facilities ​have higher ​occupancy ​rates ​than ​most ​other ​sectors ​of ​the ​market.

Add to that, the variety of amenities such as multiple unit sizes, climate-controlled facilities, full-time staff, security guards, surveillance and metro area locations, and it’s not surprising that self-storage is expanding in popularity especially with e-commerce businesses.

In 2016, occupied self-storage units – at least 85% of self-storage inventory – produced over $30 billion. And with over 2.5 billion ​square ​feet ​of ​space ​for ​lease in the US alone,  there are several reasons why it’s becoming a sought-after alternative investment:

  • Higher ​Returns. Self-storage has the potential for higher profit margins since they require less upkeep and fewer labor costs.
  • Recession Resistant. Even during the great recession, self-storage had positive returns and paid out around 5% in dividends to shareholders.
  • Lower Breakeven Occupancy Rates. To potentially turn a profit on a multi-family building, you must maintain at least a 60% rate of occupancy. For self-storage, investors can begin breaking even at as low as 40% occupancy.
  • Cheaper Warehousing Alternative. Online retailers are looking for ways to store their inventories closer to urban delivery areas. Using self-storage, they can house their products in secure, upgraded facilities that have moved closer to the cities in the last decade. 

Who’s using it and why?

Since Americans are purchasing 20 times more things today than they did in the past, consumerism is part of the decade-long surge in self-storage property values. With almost 10% using self-storage and most using it long term, there’s no sign of a slowdown.

Another factor contributing to the self-storage investment is the economy.

Homeowners are downsizing, and baby boomers are opting for condos instead of single-family homes. And this year alone, three devastating hurricanes have caused massive migrations of people and things, resulting in a sharp uptick in the use of storage facilities. Some units that were in the path of these storms were destroyed, meaning less supply and more demand throughout the affected areas.

People displaced due to storms, the transitional lifestyles of Millennials, downsizing baby boomers and those suffering through financial downturns account for many Americans at one point or another, which is what makes self-storage a potentially recession-resistant, emerging investment with stability and high yields.

What do potential investors need to know?

The number of new self-storage developments breaking ground this year is the highest it’s been in a decade. Meanwhile, innovation is turning self-storage facilities into a major part of e-commerce distribution models.

Advancing self-storage technology will also increase the price tag for some facilities in the future, and those will be the most highly sought after, continuing this booming alternative investment trend.

For questions or more information on self-storage investments, contact us today at (973) 532-6846.