Thursday, April 27, 2017

Selling space; Self-storage is a $32 billion industry that no one notices

Well into the mid 20th century, the thought of selling nothing but empty space to someone probably seemed ludicrous. (Probably as ridiculous as bottling and selling drinking water that you could get from the tap for free!) After all, how could one person – or even one family – have so much STUFF that they needed an extra space to store it all? 

But in 1958 in Fort Lauderdale, Florida, that’s exactly what happened as the first modern self-storage facility opened. A few years later in the 1960s, a copy cat about a storage facility in Odessa, Texas called “A-1 U-Store-It U-Lock-It U-Carry the Key,” which apparently attempted to give consumers the entire premise for the industry right in their name. What was interesting about these storage spaces was that they were located in an industrial near where fisherman needed to store their boats for the winter.

The convenience of off-site, secure and easily accessible personal storage for the average person took off in 1972, when the first Public Storage opened in El Cajon, California catering the idea to the general public and launching a massive new industry.

So 45 years later, just how prevalent are self-storage units in our society?

9% of all U.S. households – nearly 1 in 10 – currently are renting a self-storage unit, adding up to about 10.85 million people that have their things in storage!

That’s up from just 6% of households that used self-storage in 1995.

We have so much storage space that every household in America could rent 21 square feet of space and we wouldn’t run out, or an average of 7.3 square feet of storage for every man, woman, and child in the United States.

In total, we have about 2.3 billion square feet of personal self-storage space, adding up to 78 square miles of storage.

To put it in perspective, if you combined all of the storage space in the United States, you could fit three Manhattans inside of it with room to spare!

There are now about 52,500 self-storage facilities (not individual units) in the United States. 48,500 of those facilities are the primary source of income for their owners.

Compare that to the number of self-storage facilities in all of Canada (3,000) or Australia (1,000) and you can see that we have a serious overflow of stuff.

The average self-storage facility spans 46,500 sq ft, which is about as big as one football field (57,600 sq ft with the endzones or 48,000 sq ft without them).

In 2016 alone, the self-storage industry in the US generated an estimated $32.7 billion in profits, a 33% increase from $24 billion in revenue in 2013.

That’s more than every individual company in the Fortune 500 except for Apple ($53.4 billion profits).

The self-storage industry's $32.7 billion in profits is also more than the total GDP of Bahrain, Yemen, Latvia, Paraguay, Honduras, and Iceland, and 88 other countries.

People don't keep their things in storage forever, or even on a long-term basis. In fact, 13% of all self-storage renters keep their unit for less than three months, 18% rent for 3-6 months, 18% rent for seven months to a year, and less than 50% rent for a year or more.

Investing into the self-storage industry and building new facilities has proven to be a safe and fruitful move. In fact, growth rates in REITs (real estate investment trusts) that focus on self-storage units have increased 5.7 to 8.5% per year the last few years, with expected growth of at least 3.5% annually over the next five years. 

Despite the massive growth in self-storage facility construction, occupancy rates remain high, with about 90% of all self-storage units presently occupied – and a waiting list at many facilities. 

But the growth of the industry doesn't just point to our gluttony but also serves a vital purpose, as 6% of all self-storage units are rented to our military personnel and their families.

The biggest companies in the self-storage industry include:

1.         Public Storage: $2.56 billion in 2016
2.         Extra Space Storage: $991.87 million in 2016
3.         CubeSmart: $510 million in 2016
4.         Life Storage: $462.6 million in 2016
5.         U-Haul: $247.9 million in 2016 (self-storage revenue only)

The largest self-storage operators in the U.S. (listed by the number of facilities) include:
1          Public Storage: 2,348 facilities
2          Extra Space Storage: 1,427 facilities
3          U-Haul (AMERCO): 1,360 facilities
4          CubeSmart: 791 facilities
5          Life Storage: 659 facilities

While there are 4,500 mid- to –large sized firms that run multiple storage facilities,
About 27,650 facilities are owned and operated by small business entrepreneurs.

In fact, 90% of all self-storage facilities are run by entrepreneurs that own just one facility.   

Over the last 35 years, the self-storage industry has been the fastest-growing sector of the U.S. commercial real estate industry – more than malls, office space, medical facilities, etc.!

Primary self-storage facilities employee about 163,000 people across the country, or an average of 3.5 employees per facility other than the owner.

Who rents these storage spaces? About 27% of all people who rent storage spaces live in apartments or condos, while 68% live in single-family homes.

It's hard to make a case for shrinking living spaces for our increase in self-storage use, as 68% of all storage renters have a garage, 47% have an attic, and 33% have a basement at home!

Nor do we need more storage space because we live in small spaces in cities without extra room, as only 32% of storage facilities are urban, 52% suburban and 16% in rural areas (assuming people rent near where they live).
You may be wondering how much a self-storage unit will cost you. Of course, things are always more expensive in California, but the average cost by unit size nationally is:
5×10: $63 per month
10×10: $96.09 per month
5×5: $45.30 per month
10×20: $137.06 per month
10×15: $123.01 per month

The self-storage industry is so big that it has its own tax-exempt organization, The Self Storage Association (SSA), which lobbies Congress and other federal agencies on behalf of owners and businesses in the field.


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