ST. LOUIS — America, home of the free and land of self-storage.
Of all the self-storage in all the world, more than 75 percent of it is in the United States. There are nearly 50,000 self-storage facilities in the United States. The rest of the world has about 15,000 combined, according to the Self Storage Association.
Demand for self-storage is most often attributed to four major life events that the industry calls “the four Ds”: divorce, death, downsizing or dislocation (i.e. job loss).
“The big driver is change,” said Brad Schwer of Morningstar Equity Research. “In one way or another, people are looking for stability.”
The U.S. has an estimated 2.6 billion square feet of self-storage, according to the Self Storage Association. That’s about 8.1 square feet per person, and that’s growing.
“We’re not sure how long this trend will last. We think maybe we’re at the top of the bell curve,” said Mike Blackett, a senior vice president with the Alexandria, Virginia-based trade group. “But the demand is there, and facilities are expanding, so you will see some price wars, competition and see who’s left standing.”
When a steady income or residence is elusive, leasing a small square of storage space for possessions can provide peace of mind, according to Beau Reinberg, co-owner of the 10-year-old W-Ave Storage facility in downtown St. Louis and the just-opened Extra Space Storage outside the city.
When the economy took a dip, he maximized income at W-Ave Storage by leasing to a roof-farming tenant. Part of the parking lot is a paid lot, but the other part is leased to a volleyball club.
But he has five to six new storage facility sites in the works, and they will be strictly storage. He no longer needs to diversify, he said.
The reality is that most people rent storage much longer than they expect, overvalue the sentimental items inside and rarely shop for better pricing elsewhere once their belongings have been stored.
Schwer, the analyst, calls the success of retaining self-storage customers “stickiness.” That viscous quality helped establish the sector.
“You couldn’t be in a better property sector from 2011 to 2015,” explained David Rogers, the chief executive officer of Life Storage (formerly Uncle Bob’s Self Storage) at an investor forum recorded in June. Now growth is slower, but there are still opportunities.
The vast majority of self-storage facilities are mom-and-pop shops, but corporate mega-businesses are fighting for a bigger share of the business. Life Storage has 700 properties nationwide.
Once upon a time, self-storage consisted of sketchy properties on the outskirts of town with dubious security. Now, they’ve become integrated into communities. The buildings are nicer; year-round climate control is standard; there’s personnel on-site; security is sophisticated, and payments are automated.
But the factors that make self-storage great for investors are not always appealing to communities.
Each facility typically employs only two or three people. They generate minuscule traffic, which is not great for nearby retailers or neighborhoods that want to appear lively.
“Usually not generating a lot of traffic is a good thing, but the two biggest challenges are finding available land and getting projects approved by the city in an area that you want to be in,” said Benjamin Hagedorn of Northpoint Development, which has launched a new storage company that opened its first two 300,000-square-foot facilities under the name Beyond Self Storage in the St. Louis region this summer.
“Even though, we’re quiet, we don’t pollute, and the building is nice too. Self-storage is just not the sexiest use. Some places would rather see an active Starbucks,” he said.
Schwer called self-storage smart for investors, but when asked if it was smart for customers, he hedged.
“It’s a good business to be in,” he said. The reason it’s a good business is because there’s a low bar for entry and the industry has proven that you can raise rents on existing customers by 5 to 10 percent every eight to 10 months or so, and they will stay. Most are on auto payments, Schwer explained, and the incremental increases aren’t typically enough to spark a reaction.
“People aren’t going to move into a new space even if it’s half the price. Nobody is going to go and take the trouble to pick up all of our stuff and move it,” Rogers of Life Storage explained to investors.
Clutter-clearing professionals and certified organizing specialists have a different perspective on “good.” It’s not surprising that they do not approve of the thriving self-storage trend.
Sue Anderson initially stopped short of calling self-storage insidious, then she thought better of it and said, “I think they should be ashamed. Wait, is there ever a good reason? Hmm, I don’t know, fire maybe. A parent’s death and you need time to cope. Maybe.”
“Yeah, sometimes our biggest competitor is the dumpster,” Hagedorn said as a fact, not a joke. But he isn’t anti-minimalism, nor does he bemoan the clutter specialists who disparage self-storage.
“The reality is that sometimes people do plan on temporary use of three to six months but end up renting long term,” he said. “People have different reasons, some of them are storing memories and they just want someone to take care of things that are important to them. And if it’s important to the customer, then it’s important to us.”