Comparative Shopping: How Does Self Storage Measure Up? By Steven Ekovich
Strong fundamentals, steady returns, and less management intensive ownership have sparked the inter- est of investors to the self-storage market over the past several years. the self-stor- age market has shown resilience in times of economic downturn and steady gains during economic recovery. investors will have some concern for the next few years as a result of current weakness in the housing market, a slowing economy, and significant increases in new supply; however, the long-term outlook for self- storage properties remains positive.
A slowdown in the national economy has caused some weakness in self-storage demand over the past year. Employment growth slowed in 2007 to 1.1 percent, down from 1.7 percent in 200. in addi- tion, the credit crunch and housing woes continue to weigh on the economy, caus- ing Gdp to fall to 2.5 percent in 2007, down from 2.9 percent last year. these factors, coupled with the slowdown in the housing market, have caused a recent slowdown in demand.
A reduction in migration-generated demand due to weakness in the hous- ing market is forecast to limit improve- ment in occupancy levels in all but the strongest job markets. Further pressure on suburban occupancy levels will come from the cooling housing market and corresponding reduction in demand cre- ated by residents relocating into new homes. Some industry pundits portend demand will also increase as homeown- ers facing foreclosure in some previously overheated housing markets will store their goods. We believe this argument is specious because if they can’t afford, for example, an extra $100 in loan interest, it is unlikely they will run out and rent a storage unit after they have been foreclosed on.