Few asset classes have consistently demonstrated resilience during economic downturns as self-storage facilities have.
Self Storage's Economic Resilience
Economic recessions often lead to life transitions, such as downsizing homes or businesses reducing office space. According to data from the National Self Storage Association, during the 2008 financial crisis, while many sectors faced declines, self-storage facilities saw increased occupancy rates, underlining their counter-cyclical nature.
Operational Efficiency and Profit Margins
A comprehensive study by the Self Storage Association highlighted that these facilities typically maintain an operating expense ratio of just 25%-40%. This lean operational model ensures that even with a slight dip in occupancy, profitability remains intact.
Compared to other real estate assets, self-storage facilities require minimal upkeep and renovation. This translates to lower capital expenditure and consistent cash flows, even during economic challenges.
Adaptive Pricing Models:
The inherent month-to-month leasing structure of self-storage units allows operators to adjust pricing dynamically based on demand. Data from the Self Storage Economic Report indicates that during economic downturns, facilities often offer promotions or discounts, ensuring a steady influx of new renters and retention of existing ones.
Diverse Clientele Base:
The clientele of self-storage facilities varies, ranging from individuals storing personal belongings to businesses housing inventory. Data from the Self Storage Demand Study shows that during recessions, while individual usage might slightly decline, business usage often increases, providing a balanced demand.
Conclusion
The empirical evidence is compelling: self-storage investments are uniquely positioned to weather economic uncertainties. Their operational efficiency, adaptive pricing models, diverse clientele base, and strategic locations make them a standout asset class. For investors seeking stability amidst economic volatility, self-storage facilities offer a promising avenue.
Next Steps: Interested To Learn More or Invest In Commercial Real Estate?
If you would like to learn more about our Open Funds or invest in Commercial Real Estate please contact our investor relations team by completing the New Investor Form here (it will take less than 2 mins).
