Americans love our stuff — and we’re so reluctant to part with it that we’re willing to pay someone else to store it. Storage Cafe estimates that 38% of Americans have used or plan to rent space to store what they can’t (or don’t want to) keep in their homes. Over the past two years, there’s been a boom in the self-storage industry, driven partially by the effects of the COVID-19 pandemic. Due to safety concerns and lockdown conditions, people across the country were forced to move things out of their residences to make space for work and school at home.
Now that the pandemic is over and we’re settling back into more “normal” market conditions, many are left wondering about the outlook for the self-storage industry. Will the popularity of self-storage hold steady and continue to drive profits? According to a recent article in the Wall Street Journal, the answer to that question is a resounding “yes” — despite the fact that there are signs that the self-storage frenzy is slowing.
For the past couple of years, savvy (and in some cases, lucky) entrepreneurs and investors have been able to scoop up neglected storage properties and turn them into money-making machines. As we head into 2024, those quick-win opportunities are dwindling, and occupancy rates and rent prices are falling from the all-time highs self-storage business owners have been enjoying. However, well-managed self-storage facilities will continue to hold strong for several key reasons:
- The unique pandemic conditions may be over, but each of us will continue to experience one or more of the primary self-storage demand drivers at different points in our lives — death, divorce, dislocation, and downsizing.
- Competition amongst self-storage facilities is fierce. In an effort to get customers in the door, many try to undercut each other with hard-to-pass-up promotional offers. Once a tenant moves their belongings into a unit, they’re unlikely to go through the hassle of moving to another nearby facility just to save a few bucks each month.
- Incremental rent increases, even in the midst of recessions, typically aren’t strong enough motivators for people to purge belongings and give up their units. To the contrary, in fact, recessions typically increase the demand for self-storage as people are forced to move belongings to storage facilities as a result of downsizing to smaller living spaces or moving to follow employment opportunities in another city or state.
- Despite inflation and rising prices, consumer spending is still high. As long as Americans continue to buy more stuff than they can comfortably or conveniently keep in their homes, they’ll continue to fork over storage-unit rental costs — even if that means spending more in rental costs in the long run than the value of the items stored.
See the full Wall Street Journal article for more insights and details.
Although the self-storage industry may not continue to see the anomalous growth that lined many investors’ pockets during the past few years, self-storage businesses will continue to thrive. One thing is a certainty: These operations face unique property and liability risks and benefit from insurance coverage tailored to their specific needs.
MiniCo is the expert in self-storage insurance, offering a wide range of coverages for self-storage business owners and their tenants. No matter what the future holds for the self-storage industry, we’re here to ensure that your clients’ business investments are protected by the appropriate insurance coverage. Looking for risk management resources for a self-storage risk? MiniCo’s in-house underwriting and claims teams have more class-specific experience than any other insurance provider. Our Commercial Self-Storage program team is available to provide risk management resources to help your clients reduce the risk of costly claims and improve their risk profile in determining insurance premiums, deductibles, and limits. Contact a MiniCo self-storage expert for more details and to get a quote.