Self-storage facilities provide secure storage locker units of varying sizes rented largely to residential customers and commercial businesses. The appeal of self-storage over mainstream real estate investments (Office, Industrial, Retail and Apartment) is that their operating costs tend to be lower – for example, the breakeven occupancy rate for a self-storage facility is approximately 40% to 45% as compared to 60% or more for apartments. Consequently, self-storage facilities tend to hold their value better and recover faster than Office, Industrial, Retail and Apartment investments when real estate markets soften (source: Self Storage Economics, The Appraisal Journal, Summer 2013, R. Christian Sonne). According to SpareFoot Storage Beat, the self-storage industry is worth $38 billion annually in the U.S. with an overall supply of 7.06 square feet per capita compared to a national average close to 2.0 square feet per capita in Canada and annual revenues of $840 million.
At one time, storage was bare bones – essentially a garage with a lock. Today, facilities now feature secure, climate-controlled and well-lit environments with motion sensor lighting and heated floors. There is a tremendous opportunity for new self-storage facilities to take advantage of an undersupply of quality self-storage facilities and an expected increased demand driven by “urban storage” as rental and condominiums become smaller in size.
New self-storage properties offer solid fundamentals – low recurring capital expenditures, low operating costs, high operating margins, tenant base diversity, negligible defaults on rental payments and strong performance through economic cycles including recessions when foreclosures and other forms of dislocation often lead to increased storage demand.