Self-Storage Trends to Watch Over the Next Decade
The self-storage industry is in a period of rapid expansion thanks to urbanization, lifestyle changes, and the need for additional storage space. The asset class as an investment opportunity has also gained popularity among investors, from private individuals to institutional funds worldwide. Over the next decade, several emerging trends are set to revolutionize the self-storage landscape, from technological advancements to changing consumer behavior and niche subsectors.
How the Industry Has Evolved
When self-storage units were first created in 1964 in Texas, they served one purpose – to temporarily store people’s belongings in lockers or small unconditioned units. However, the sector has grown immensely and now provides far more than just basic storage solutions. The industry has advanced to climate-controlled units that you can adjust the temperature of your unit by using an app on your phone, enhanced security measures with world-class camera systems and the ability to alert the police if there are any security breaches, and restricted accessibility for tenants who are more than a day late on rent, which has significantly elevated the sector and its technological advancement. Individuals now have greater confidence in storage facilities that safeguard their possessions from environmental damage, theft, and more.
Furthermore, there has been a notable improvement in the appearance of storage facilities. Initially resembling plain structures, they have evolved into more appealing and well-maintained facilities with well-kept grounds and brighter aesthetics.
With these advancements, self-storage has gained traction among more consumers, causing the demand for these facilities to skyrocket. People are amassing more belongings, downsizing their homes, or seeking temporary storage while relocating. This tendency is projected to continue, and investors/ developers have taken notice, resulting in the constant addition to the new development pipeline and transaction velocity surpassing $5B+ annually for three consecutive years.
Technology plays a significant part in the overall success of any self-storage facility. As of late, self-storage operators have embraced technology to manage their businesses more effectively and efficiently, saving time and money.
Here are a few examples of technological advancements shaping the sector:
In some cases, self-storage facilities may provide owners with video access to their property through remote monitoring. This way, owners can access video footage of their storage facility from anywhere via a secure internet platform or mobile app. This allows owners to keep track of anyone entering or exiting the property, ensure no one is sleeping in units, etc. In conjunction with remote monitoring, self-storage access control systems allow real-time detection of problems, such as water damage or theft. Management will be notified and can address the issue before it becomes something major.
Biometric and Bluetooth Locks
Bluetooth and biometric locks are advanced security measures used for self-storage units. Bluetooth locks utilize wireless technology to connect the lock and a compatible device. This enables authorized users to unlock and access their storage unit through an established mobile application. Bluetooth locks offer convenience and ease of use, eliminating the need for physical keys or codes. Biometric locks utilize unique physical characteristics of individuals, such as fingerprints, to grant access. These locks require users to scan their biometric data, which is then compared to pre-registered information to authenticate their identity. Biometric locks provide a high level of security, as they are difficult to bypass or replicate.
Automating and converting to an entire self-serve operation is one of the most popular ways to save money as a self-storage facility owner. Additionally, most storage facilities now utilize self-serve technology to provide their customers utmost convenience. This technology assists facility managers, and owners in enhancing customer service and streamlining various tasks. Embedded software, seamlessly integrated with a robust property management system, enables tenants to utilize self-service kiosks for continuous access to the storage facility. New customers can also rent units through a kiosk on-site or even through an app, allowing this to be done remotely for the facility’s owner.
Self-storage management software is a comprehensive system built exclusively for efficiently running and organizing self-storage facilities. This program allows facility owners and managers to automate various duties and processes, including customer management, unit rents, payments, inventory monitoring, and reporting. Though this software is not new and has been used for years, updated advancements have emerged through cloud-based software, providing operators with a new way to update data in every aspect of their facility.
Changing Consumer Behavior
The need for more convenience and accessibility is a critical trend in customer preferences affecting self-storage demand. Customers are now looking for self-storage facilities that provide flexible access hours, convenient locations, and user-friendly technology for remotely controlling their storage units. This has resulted in the development of features such as 24/7 access, automated rental processes, and digital payment and reservation management platforms.
Changing consumer preferences have also impacted the need for extra amenities and services. Climate-controlled rooms, on-site packing materials, truck rental services, and even value-added services like shelving construction or relocation aid are now available at self-storage facilities.
Niche Self-Storage Subsectors
Several niche subsectors exist within the self-storage market to cater to distinct consumer demands and preferences. These subsectors go beyond standard self-storage units to provide specialized storage options. Among the noteworthy specialist self-storage subsectors are:
The consumer base of wine collectors is a continuously growing market, and several collectors need a space to store their ever-growing collections. This subsector specializes in offering climate-controlled storage units designed exclusively for wine collections. These machines keep the ideal temperature and humidity levels for wine storage.
Self-storage offers numerous possibilities for business owners. Storing documents poses a challenge for many organizations that rely heavily on keeping paper copies of all documentation, such as law firms, insurance companies, and hospitals. In such cases, a self-storage facility often serves as an ideal resolution.
Boat and RV Storage
Boat and RV storage facilities are not necessities for the average consumer. As a result of their niche clientele, these facilities are typically in specific areas, nearby national parks, campgrounds, boat launches, and lakes.
Specialty Item Storage
Some self-storage facilities specialize in items such as musical instruments, artwork, collectibles, or sports equipment. To secure these costly or sensitive artifacts, these facilities may include specific storage features such as temperature control, humidity control, or additional security measures.
What Does the Future Look Like?
According to the May 2023 Yardi Matrix report the average rental prices for storage units across the country showed slight improvements in April compared to the previous month, which aligns with the usual seasonal trends. The overall rates for all unit sizes combined rose by $1 to reach $141, indicating a 70 basis point increase from March. However, the rates for standard-size 10×10 units, including non-climate and climate-controlled units, remained unchanged.
Among the top 31 metro areas tracked by Yardi Matrix, Raleigh-Durham was the sole region to experience rent growth in April. The rental prices for non-climate controlled 10×10 units in Raleigh-Durham rose by $1 to reach $101 during that month. This increase marked the first time since 2017 that Raleigh-Durham witnessed rental rates at this level.
Despite economic headwinds, the sector is still seeing tremendous growth, which is reflected by the use of self-storage increasing to 14.5 million people in 2022, up by 970,000 since 2020, according to YardiMatrix. Investors expect this trend to continue for the foreseeable future and are optimistic about the sector thanks to its convenience factor.