The Full Picture: How The Best Investors Are Looking At Demographics

One of the most important factors to consider when analyzing self-storage deals is the demographic makeup of your customer base. Uncovering the full demographic picture of your market will help you understand who your customers are, what needs they have, and where to find them. Below are some critical demographic indicators the best investors look at when analyzing deals. 

Population 

How many people live within one mile, three miles, or five miles of your site? How many people live within 20 minutes of your site? 

Typically, the more people that live close to your site, the easier it will be to find new customers or replace customers that decide to leave because you have a greater population to draw from. 

According to the SSA 2023 Self Storage Demand Study, nearly 70 percent of renters live within 20 minutes of their self-storage unit.

Population Growth 

Is the population in your area growing or shrinking? By how much?  

What residential construction projects are underway in your area? 

If the area around your facility is desirable and people want to live there, it’s a positive sign for the future demand potential of your site. 

Investors typically favor markets with positive population growth trends. However, just because a market isn’t growing doesn’t mean the deal is bad. It could just mean that the market is more urban or has higher barriers to entry. 

By the way, TractIQ tracks projected population based on census data and housing starts, which can be ahead of the census data in showing growing markets. 

Housing 

Does your customer base mostly own their home in the area or rent? Does your customer base have attics, basements, or garages? 

Apartment renters typically don’t have basements, attics, or garages and may have a greater need for self-storage due to lack of space. 

According to the SSA 2023 Self Storage Demand Study, 72 percent of long-term renters use storage because they don’t have room at their residence.

Income And Home Value 

What is the median household income in the area? What is the median home value in the area? 

Although the above indicators aren’t the best predictors of storage performance, they will give you a snapshot of an area’s economic stability, desirability, and long-term wealth accumulation. Areas with higher income and home values can generally support higher rental rates. 

Though many investors use median household income, median home value is a much better predictor of higher rental rates. See Ethan Galowitz'd post here for more. 

Daytime Population 

How many people travel to or away from your facility during the day? 

According to the SSA 2023 Self Storage Demand Study, over 30 percent of renters first learn about a facility from driving by.

If your facility is located within a hub where people naturally travel daily, your organic leads will be much better than a facility located in an area where people migrate away from daily. 

Supply Per Capita 

What is the supply per capita within three miles and five miles of your site? 

The supply per capita metric is widely used among investors in the industry. It is simply the amount of self-storage space per person in a given area and is calculated by taking the total net rentable square footage of every self-storage facility within a particular radius divided by the total population of that same radius.  

Typically, the lower the supply per capita metric is, the better. If there is a low amount of self-storage in an area compared to lots of people, self-storage owners will have greater pricing power. 

While many investors will set an arbitrary threshold for supply per capita and ignore all deals above that threshold, the data actually shows that once supply per capita is above 8.0, there is little correlation between rental rates and supply per capita. Check out "Does Lower Market Saturation Lead To Higher Storage Rates?" to learn more. 

Understanding the demographics of your area is critical in answering the question “Do I want to invest here?” Next time you are analyzing a deal, make sure to look at the above indicators before furthering your research. 

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Noah Starr is the CEO of TractIQ.  

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