The Rise of Self-Storage

Where do you invest when you’re looking for an alternative to multi-family property or are concerned about the direction of retail or office in your commercial real estate portfolio? Many successful investors believe self-storage is an excellent investment option. 

According to Mordor Intelligence Research, in 2019, valuation reached $87.65 billion with expected growth of the self-storage market to reach over $115 billion by 2025. A shortage of housing combined with growth and high demand makes investing in the self-storage sector quite enticing.

If you’re ready to add the next asset to your CRE portfolio, here are a few things to consider when you decide to invest in self-storage units:

Management Matters

Running a self-storage facility is more like a business than a passive real estate investment creating its own set of challenges and rewards. While it’s true that the business comes with many responsibilities, with proper management, you’ll reap the financial benefits. 

Management responsibilities include:

  • Facility and grounds maintenance

  • Keeping detailed financial records

  • Staying competitive and knowing the market

  • Understanding legal requirements

  • Managing employees

No magic sauce will make your investment profitable however, an array of modern advancements makes it easier to run a profitable enterprise. 

Leveraging the right tools and support such as online rental software, smart devices, automated gates, and call center services to allow your self-storage investment to operate with minimum overhead (including staff) can be the difference between being competitive or getting rolled over by smarter operators.  The initial investment in automating your facility will pay off over the long term.

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If You Build It, Will They Come?

When tempted to fall under that type of thinking, remember the old adage when it comes to real estate, location, location, location.

Before you invest a penny in a self-storage business, whether it’s an existing property or a new development, do your due diligence. You’ll look at several factors that can help determine whether you should or should not invest in a specific area including population demographics, traffic, visibility and accessibility among others. 

Try to invest in areas with high employment and residential turnover rates. The more traffic coming and going from the place means better performance. 

Accessibility is vital—if they can’t see you, they will not come. Instead, they’ll become your competitor’s customers.

Speaking of Building

Average costs to build a storage facility can vary from region to region with the largest variables being land and labor costs. However, compared to the costs of building other types of commercial real estate properties, self-storage typically commands a smaller investment.

Whether you plan to design a new self-storage development or you’re buying an existing business, you’ll have multiple financing options. They could include Small Business Association (SBA) loans for CRE, bridge loans, or hard money.

Ready to Add Self-Storage to Your CRE Portfolio?

Investing in CRE can be either smooth sailing or a roller coaster ride. If you invest in self-storage, there’s no guarantee you won’t experience a little of both. However, you’ll have chosen a type of commercial real estate that can garner a significant return on your investment with proper management. For more information on other types of Commercial Real Estate, see our article here.

Remember, choosing the right types of commercial real estate for your investments is easier with a great team. At Fortress Equities, we have the professional know how to guide you in the right direction to success. Get in touch with us today, or learn more about our new Real Estate Value Fund!