Future Self Storage Development

Currently a rapidly expanding industry, new Self Storage facilities seem to be springing up at an alarming rate throughout the country. Already there are storage facilities that have expanded vertically, building storage rooms on second and even third floors. These facilities have found it difficult to fill those spaces. Customers are now in a position whereby they can pick and choose which local facility they use based on not only price, but how easy it is to move their goods in and out. Because self storage is very basic, there are very few options available, two, in fact. We can only really compete on price and access.

As we look to the future of self storage, it's very clear that the future looks bright. There are a few trends afoot backed by solid industry data that justify my positive outlook on this high growth industry. These trends are as follows, there is an increased demand because the U.S. Population is predicted to reach 400 million by the year 2050. All indicators show that Americans continue to be a highly mobile society with a high predictability to accumulate things. This means that self storage companies stand to add 150 million potential customers to our prospect list who are searching for somewhere to store their belongings.

As customers become more selective in where to store their belongings, owners of older facilities will need to make necessary improvements to remain competitive. This will ultimately result in more sophisticated and higher tech facilities offering more user friendly layouts, larger offices, flexible unit mixes, kiosks, high security, and more climate control units. You should also expect to see self storage investors competing for the premier parcels located in the high traffic retail areas of town. As a result, municipalities are beginning to require that these facilities have a retail component in order to increase the amount of sales tax generated and paid to those local governments.

They are also requiring that the facilities have a certain "look and feel" that blend in with the surrounding businesses. Nicer fencing, or split block security walls, paved drives, certain architectural features, and an attractive landscape package will be mandatory and made part of the architectural permit prior to construction, and strictly monitored for compliance. It is expected that people will begin to see an increase in the number of customized services available for its customers. There have already been some partnerships being formed that provide complementary products and services. Of course the most common example is truck rental, but we are now seeing pack and ship businesses, EBAY add-it stores, Kinko's, or co-locating with retail stores such as Starbucks or Subway on the ground floor with storage above in multi-story facilities.

As more and more people frequent self storage facilities, they will begin to expect more from the facilities and the face behind the counter. These sophisticated customers are demanding excellence and consumer loyalty will quickly go out the door, along with their stuff, if they have a bad experience. Conversely, when customers are satisfied with the service they receive, they will stay, and hopefully will tell their friends about the good experience they have had. This provides an excellent opportunity for these companies to exceed their expectations, and provide a substantially better experience.

In the future, the upward value trend in self storage will continue for a number of reasons: predictably low interest rates will push cap rates low, and net larger profits for those who choose to sell. For that reason, self storage continues to rise in popularity as one of the commercial real estate assets of choice, and will ultimately attract more investors. There are still a number of individuals and investment firms that are stinging from the recent stock market corrections. These investors are now searching for a more stable investment that they can rely on as opposed to investing in a company that they have never heard of; run by people they have never met, in an industry they know nothing about.

Self storage has continued to be a great investment to exchange into and more and more investors are choosing to park their dollars here before their tax deferred status expires. Therefore, it will be imperative for owners and developers to work more efficiently to attract and retain customers in this new environment. As the saying goes, the only thing we know for sure is that things are going to change. Self storage will remain a reasonably predictable, stable, low maintenance, high cash flow investment for professional investors for years to come.