Why Self Storage Is Particularly Attractive To Investors
Self-storage facilities like StorageManchester.co are particularly attractive to investors because while the industry has seasonal vacancies they are less cyclical. During the winter months that occur during the 4th and 1st quarter, the weather is less conducive to moving and the kids are in school. During the warmer months of the 3rd and 2nd quarters moving activity picks up and the demand for storage peaks. There are also constants that offset the ups and downs in the industry.
The self-storage business is particularly interesting to investors because it is uniquely isolated from economic cycles. During a downturn in the economy, people get rid of their big expensive homes and kids tend to live with their parents until things get better. All the stuff goes into self-storage facilities. When the economy is strong, people have more disposable income they can use to buy goods which require storage.
There are also three constants that affect the industry and this includes financial hardship, divorce and death. These constants are not likely to be announced by REIT’s in their annual reports because of its rather grim connotation.
There are other demand drivers that have a positive impact on self-storage industry. First, apartment demand is up but the availability of storage space in apartments is minimal. This generates demand for storage space particularly in urban areas. Second, the recovering market of homes for sale gives rise to more moving activities which creates demand for storage. Third, college attendance is always on an all-time high and it further bolsters demand for student self-storage.
Tenants of self-storage facilities are less sensitive to prices because the rent which is a percentage of their disposable income is relatively small. Since self-storage facilities do not generally compare notes on who is paying and how rent is being paid, they have the opportunity to increase rents on individual units with less pressure from comparisons.
Most of the units are rented on a monthly basis and roughly half of the units rent for less than a year. When market demand suddenly increases, the frequent turnover allows the sector to react and raise their rents more quickly than wait for the leases of the long term office, retail and industrial customers to expire.