Self storage has become an increasingly popular real estate investment in recent years. As an asset class, it offers stable cash flow potential due to the non-cyclical nature of demand. However, there are some limitations to be aware of. Strict zoning requirements and large upfront capital expenditures can pose barriers. Additionally, technology disruptions and oversupply in some markets could impact rent growth. This article analyzes return drivers and risks to inform investment decisions.
Self storage benefited during COVID as households and businesses needed more space
The self storage industry demonstrated resilient fundamentals during COVID lockdowns as households worked on decluttering projects. Additionally, business closures freed up commercial real estate space, driving demand for self storage as an interim solution. However, these tailwinds may dissipate going forward.
Oversupply and new technology pose risks to rent growth
Some markets have experienced an oversupply of self storage facilities. Additionally, new on-demand storage startups like Clutter challenge traditional self storage. However, large REITs are adept at managing supply and incorporating technology.
Self storage offers stable cash flow potential but faces limitations like zoning, capital needs, and technology disruption. Appropriate due diligence across regional markets is essential.