Trends, Trends, Trends: New Dynamics in Self-Storage Development
TRENDS TRENDS TRENDS
New Dynamics in Self-Storage Development
By Chris Jernigan
The self-storage industry is currently
in the beginning stages of an
unprecedented development cycle
for the sector. For many years, new
construction starts have self-storage
facilities in the United States has
fallen behind population growth.
From 2010 to 2014, only 300 facilities
were built in the 50 largest metro
areas. In fact, to match population
trends, approximately 2,000 facilities
should have been built in that
time period in those markets.
This deficit will result in a
development cycle that will last
well beyond the length of a typical
cycle. We are anticipating this
cycle lasting up to five to seven
years. According to estimates, the
industry should build roughly 3,500
facilities over the next five years in
the largest markets to catch up with
population growth and keep current
with additional population trends.
It is anticipated that roughly 150200 facilities will be completed in
those markets this year and up to
400 will be completed next year.
With this deficit, it is probable that
the industry will continue to lag yearly
self-storage demand. This pent-up
demand explains why the industry is
seeing tremendous occupancy and
rent growth. There are few markets
(if any) where supply of self-storage
currently exceeds demand. It is clear
that there is tremendous opportunity
available for the entrepreneurial
self-storage developer in this
long development cycle.
What trends are we seeing
this development cycle?
Information, Information,
Information
There is no doubt that we live
in an age of Google Earth,
advanced mapping programs and
demographics available to be
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sliced and diced as fast as we can
bring them up on our computers.
With this development cycle, selfstorage development meets the
information age. Understandably,
self-storage developers across
the country in markets large, small
and everything in between are
taking advantage of the wealth of
information available to assist in
developing our product. While the
massive amounts of information
are great, be leery of “paralysis by
analysis” or “over thinking” every
nuance of every situation. We will
continue to improve the efficiency
in how we use information in our
sector as this cycle matures.
Apartments, Apartments,
Apartments
The United States home ownership
rate peaked at 69.2% in June 2004
and dropped to a 20-year low of
64.5% in 2014. Two main factors
have led to this decline: 1) Americans
are deferring marriage to a later age
and 2) the home is no longer seen
as an infallible asset class since
the 2008 mortgage crisis. Many are
saying that the multifamily market
has never seen a better set of future
demographics. This means that a
higher percentage of Americans will
be living in smaller living spaces with
a greater ease of movement around
the country. These factors bode well
for self-storage. Find a market with
strong multifamily construction starts
and you have most likely found a
good place to develop self-storage.
Location? Location? Location?
Of course location has always
been THE paramount decision for
a self-storage developer. Has that
changed? No, it has not, BUT there
is a twist in this development cycle.
In fact, let’s call it “location with a
twist”. Location with a twist says you
don’t have to be at “Main and Main.”
SBOA Magazine - Fall 2015
In fact, you don’t have to be “just off
Main and Main.” Focus on a parcel
for development that is in a great
submarket with great demographics.
In the age of GPS, the customers in a
great submarket will find you, even if
you are figuratively
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