OK, here’s a pop quiz for you. Imagine a business with little overhead, little interaction with customers after they sign on and one that has continued to grow impressively in recent years, even when times have been tough. If you guessed self storage, you would be right (and those of you who said funeral homes are excused).
Is self storage an industry worth investing in? You better believe it!
Once a self storage facility is built, the only major concerns are maintaining the property so it is clean and appealing, assisting customers, and accounting for monthly payments from customers. Once goods are stored, there is a very strong likelihood that you will only see customers on a very infrequent and scattered basis.
In a certain sense, you are a hero to your customers. You talk with them to help them through tough times. Many people in need of self storage are downsizing, going through a divorce, or have just run out of space at home to store the things that matter to them. You are part psychologist, part entrepreneur and almost always a friend.
So you want some facts about the industry itself?
*According to the Self Storage Association, the self storage industry in the United States generated $27.2 Billion in annual U.S. revenues in 2014. Growth potential? Self storage has been the fastest growing segment of the commercial real estate industry over the last 40 years and has been considered by Wall Street analysts to be “recession resistant” based on its performance since the economic recession of September, 2008.
*There are roughly 53,000 self storage facilities in the United States. There are six public corporations operating in the industry (Public Storage, Extra Space Storage, CubeSmart, National Storage Affiliates Trust, Sovran Self Storage (Uncle Bob’s) and U-Haul International). In addition, the industry has some 4,500 large and mid-sized firms that own and operate more than one facility; yet there are still more than 26,000 one facility owner/operators.
What about the stock market? The four major REITs in the self storage industry, Public Storage (NYSE: PSA), CubeSmart (NYSE: CUBE), Sovran Self Storage (NYSE: SSS) and Extra Space Storage (NYSE: EXR) have stocks that yield 3.28%, 2.82%, 3.53% and 3.54% respectively, considerably higher than the S&P 500’s average yield of 1.89%. All four REITs have increased their dividends by double-digits over the past few years.
If it sounds like a success story, it is. Self storage has grown by leaps and bounds since its early days in the 1970’s when it was located in warehouses at the edge of town. It has become a smarter, more savvy industry that has learned how to promote itself and improve its product.
Yes, this is a very good time to invest in self storage…or funeral homes, but the former is a lot more pleasurable than the latter.