By Meghan Hall
While many commercial real estate sectors struggled during 2020, the self-storage industry continued on its path of expansion. Its rise has been bolstered not just by the widespread adoption of work-from-home policies, but also the rise of e-commerce, two market factors that are here to stay. Recent data released by STORAGECafe, which tracks the metrics and fundamentals behind the industry, show self-storage on an upward trend following 2020.
“Self-storage provides a service that responds to people’s needs, and its resilience is a direct outcome of that fact,” said Mierela Mohan, of STORAGECafe. “Whether people moved, downsized or took on home improvement projects in 2020, self-storage was there to assist in a time of unprecedented life changes.”
Mohan emphasized that the sector’s growth is correlated with its position as a needs-based service. Regardless of what is going on with the economy, self-storage maintains its foothold and consumer stronghold. Last year, noted STORAGECafe in its report, as many people were relocating, downsizing or simply clearing out space for home offices, self-storage became an increasingly necessary resource.
Additionally, the nature of self-storage allowed it to adapt quickly to safety standards and regulations put in place after the advent of COVID-19. It was easier for operators to maintain social distancing measures. Numerous emerging platforms and technologies allowed the self-storage industry to operate efficiently online, maintaining both safety and clientele.
“Moreover, the operational side was easy to maintain for self-storage, as much of the industry already had the resources and infrastructure to deal with the pandemic-induced changes. Operators were able to adapt to social distancing requirements while still catering to their customers by extensively turning to online booking and payments,” explained Mohan. Even virtual tours became standard practice for many, helping to streamline the typical business-customer transactions. Additionally, many self-storage facilities offered concessions in the form of student discounts and waivers to support occupancy in 2020. With steady demand and positive move-ins, self-storage construction has moved forward throughout the year.”
Rental rates during 2020 had been negative for much of the year as inventory rapidly increased in 2019. However, demand surged during the pandemic, leading to a gradual increase. In December of 2020, the average street rates for a standard 10 foot by 10 foot per unit came to $118, a 3.5 percent increase compared to the previous year.
A number of new developments also came online. In 2020, deliveries accounted for 49.4 million square feet. While this is a decline from the 56.3 million square feet of storage space delivered in 2019, and the 56.9 million square feet delivered in 2018, the decline in new construction has allowed the market to balance. In 2021, 43.6 million square feet—about 590 different facilities—are slated for delivery.
Nationwide, many of the top ten markets for the self-storage industry are increasingly dense metropolitan areas, including New York City and the Puget Sound. New York was the most active self-storage industry in 2020, with over three million square feet added, tripling the rate of construction from previous years.
“The top 10 markets for self-storage construction in 2020 are also some of the most populated metro areas in the US. The high delivery level of new self-storage space is most likely connected to growing demand from an ever-growing customer pool,” said Mohan. “There is also a diversification of needs at play, which ranges from seeking more space for regular, home-related items such as furniture and appliances in places that feature smaller apartments — like Seattle and New York City — as well as vehicle and hobby gear storage in Texas and temporary storage in high-mobility hubs like Washington, D.C. and Miami.”
The Seattle-Tacoma-Bellevue market was also highlighted as one of the busiest for self-storage. Since 2017, deliveries in the region have doubled year-over-year. In 2019, the market saw 1.36 million square feet of self-storage space constructed. The market is also one of the most expensive in the country, with a street rate of $153 per square foot. Portland was also ranked highly, with 1.2 million square feet of inventory added in 2020. Last year, the average storage unit rented for $139 per month in 2020.
With fundamentals climbing, Mohan and STORAGECafe predict that the self-storage market will continue to grow in 2021. At the beginning of the year, street rents for a standard unit increased by 3.5 percent when compared with the same time in 2020. About 87 percent of the nation’s top markets saw positive street rates, supporting further development and activity in the coming years.
“The self-storage industry finished 2020 strong by continuing to perform well, even when faced with economic difficulties,” stated Mohan. “Development continued through December 2020 and will likely keep an even pace throughout 2021, albeit slower than in the previous 5-year cycle.”