Self-storage facilities are still a relatively new frontier for investors, but since its rise and development in the 1960’s, people are starting to turn their eyes on this prospect in favor of playing the stock market. Popularity increase for self-storage is happening for a few reasons, but namely because it’s playing out as a low-risk, high-yield investment with decently consistent returns. Not only does the industry make for a valid investment, but presents easy opportunity for portfolio diversification. Find out why self-storage is such an attractive avenue for investors, and how you can decrease your volatility within your own portfolio. The self-storage industry has proven to be relatively recession resistant, which can decrease your risk in an unknown economic future. The self-storage asset class outperformed many other investment sectors during the recession of 2008, producing -3.8% of return versus the industrial sector which hit -18.35% and mortgages which went to -19.54%. A strong performance during economic gains is consistent with self-storage facilities, as more people earn disposable income there is a higher demand for storage space for extra possessions. As for times of economic recession, as people need to move to smaller homes or downsize temporarily, storage facilities also perform very well even though it may be considered an additional expense for people and families. Self-storage facilities stay consistently full, and roughly one-third of available storage spaces contain the same items for three years or more. Self-Storage facilities also demonstrate an excellent rate of return and opportunities for rent growth. Generally, the cost of renting a storage unit constitutes a tiny portion of a person’s monthly income. This allows for facilities to raise rents as demand grows without worrying a renter will switch facilities. Generally, its more cost effective for people to endure a small rise in cost than hire a truck and spend a weekend moving to a different storage facility over a few dollars increase. In some cases, tenancy of storage units shifts quickly, allowing for opportunities to raise rental prices without hurting existing tenants. An increase in rates for renters offers a consistent yet gradual return of income for property investors. The market of self-storage facilities is currently highly fragmented, with nearly 80% of the industry held by small investors and investment companies. With only 16% of the industry held by large companies, there are a lot of opportunities for smart buyers to take advantage of self-storage facilities under the right circumstances. These players have the potential to gain substantially when purchased at the right price or otherwise invest properly. The consistency and overall success of the industry has attracted a lot of investors as it has had a solid past with a near guaranteed return. Demand for storage spaces never tends to stop either, as it has demonstrated that no matter the economy’s condition, people still utilize storage spaces throughout their community. Adding self-storage spaces to your portfolio is not only an opportunity to diversify, but also to help your portfolio become a lot less volatile with overall reduced risk.
