13 Feb Demand for Self-Storage Remains Intact, but Threats of Oversupply LoomThree-building Lumen Briarcliff development is going vertical
The self-storage sector has historically been considered resilient and recession-resistant. This year, key trends are already emerging that will contribute to the health and performance of this $80 billion industry.
Shined-up facilities
What started in early 2000s continues to today. Where decrepit, one-story metal buildings with chain-link fences were the standard, now high-caliber, well-designed and polished facilities dot the landscape.
Today, new development is almost exclusively Class A product. Intown and suburban communities demand it. And customers now expect professional lobbies with music and complimentary snacks and beverages, staffed by knowledgeable and skilled managers selling space that is clean, bright and secure.
The once red-headed stepchild of commercial real estate is now the belle of the ball. The proof can be seen in the fervent attention from public REITs and private equity firms. Blackstone Real Estate Income Trust grabbed headlines in 2020 with its acquisition of Simply Self Storage for $1.2 billion.
Smaller, yet just as notable, transactions also support increased valuation. In 2022, Space Shop Self Storage, one of the top 20 self-storage operators in the United State, sold two portfolios totaling nine facilities to Extra Space Storage for $137 million, or approximately $250 per square foot.
Institutional and private investment firms are expected to continue to make Class A self-storage a portfolio staple, driving-up valuations and sale prices or, at the very least, stabilizing the institutional quality of the asset class.