SELF STORAGE BUSINESS:
INDUSTRY OVERVIEW:
Considering investing in a self-storage facility? This might be an easier way for entry-level real estate investors to get into the game. Why?
Check our Self Storage Financial Model here
The global self-storage market was valued at USD 48 billion in 2020 and is expected to reach a value of almost USD 65 billion by 2026, registering an average forecast yearly growth of around 5.5% over the forecast period, 2021–2026.
The self-storage market has proven to be in demand (occupancy rates at 92% in the US), profitable, recession-resistant driven from an increased urbanization trend, as well as COVID proof. The performance of self-storage properties is primarily driven by:
· The permanent shift towards a remote work model to cut out on rents on spaces.
· Extremely expensive office rental space especially in metropolitan cities.
· Densely populated regions lead the population moving to smaller houses.
· Growing space demand for additional storage as families increase material possessions. Around 10% of the US population use a self-storage facility.
· More mobile population with more renters who move around more frequently, and who choose to rent than own their home.
· Rising unemployment levels (due to recession or COVID), result in tenants moving back home, exploring house-sharing options, or downsizing.
· The industry is dominated by small operators (around 70% are small operators in the US) that operate around half of the rentable square footage, which indicates a sector under consolidation with many opportunities.
· Technological developments emerge in the sector to address millennial needs and COVID restrictions (contactless, online booking and payment, self-service kiosks, and automated access).
· Turnaround opportunities from improving management systems software and process automation (from opening the gate to signing contracts) to streamline manual operations.
· The Asia-Pacific region has more scope for self-storage. The size of an average home is around 80m² in Hong Kong, Singapore, and Japan compared to 250m² in the United States and Australia.
· Urbanization and the growth of small businesses are driving the demand for self-storage. The demand is primarily driven by death, divorce, density, and dislocation, and business activity like office expansion and contraction.
· There is also investor interest in the real estate asset class because of market growth and the lack of specialist self-storage REITs.
Among the other noteworthy geographic markets are Japan and Canada, each forecast to grow at 6.3% and 5.3% respectively over the 2020–2027 period. Within Europe, Germany is forecast to grow at approximately 5.3% CAGR.
Check our Self Storage Financial Model here
SELF STORAGE OFFERINGS & CUSTOMER SEGMENTS:
The offerings in self-storage consist of various components:
· Different-sized rental units
· Renters’ insurance
· Packing Supplies (pallets, boxes, wrap…)
· Truck rentals
· Lighting, climate control, and power
Our model allows you to set the revenue parameters of your self-storage facility and check your revenues.
Which allows you to target a variety of customer segments:
· Retail (people moving, downsizing, extra storage, etc.)
· Businesses (store’s inventory, wine storage, pharmaceutical, etc.)
· Other special categories (boats, cars, RV parking, movable storage, etc.)
WHAT MAKES IT AN INVESTMENT OPPORTUNITY?
There are 3 ways to enter the self-storage market:
· Construct a new facility
· Buy and existing facility
· Convert another real estate asset to a self-storage facility
The best investment opportunities come from undervalued properties which check the following criteria:
· The facility needs updating and upgrading
· It has little or no online presence
· Underperforming management
· Underperforming marketing
Our model can be modified to cover all the above scenarios or be tailor made to your needs.
Check our Self Storage Financial Model here for the construction, operations, and exit
Check our Self Storage Financial Model here for the acquisition, upgrade, operations, and exit
SKILLS INVOLVED IN A SUCCESFUL STORAGE BUSINESS:
Find storage projects
Develop relationships with self-storage brokers who work in the area you want to own to get a consistent deal flow.
Analyze the financial viability of opportunities
It is critical to be able to analyze a prospective deal and project the future cash flow of new facility by understanding:
· The future cash flows
· The construction costs
· The operating costs
Our model can support you in the analysis of your investment.
Finance storage opportunities
Be sure to know what type and how large of a loan for which you can qualify. Check in with a lender or two prior to writing your first contract. Our financial model can assist you in determining the net operating income of your project, and the loan you can support to service.
Determine project-construction costs
What the construction process involves, and its approximate cost, the construction starts and its duration, what will the net operating income look like when stabilized. You need to know these parameters upfront so you can run your financial analysis and feed the financial model. Our financial model tells you what you can afford to pay without showing negative cash flows. This will help you to meet the project budget set in the beginning.
Construct or oversee the construction / subcontractors
Will you hire a general contractor or a construction manager, or will you do it yourself? You need to stay very involved, and not simply turn it over. This will allow you to meet the project budget set in the beginning.
Check our Self Storage Financial Model here
PRESENT YOUR PLAN TO A POTENTIAL INVESTOR:
Within your presentation focus on what you have already made for your project and how investments can contribute to its development. Make your presentation short and demonstrative.
Visualize your business plan by creating charts and graphs that will talk about your project even better than you will. Present your experience and knowledge around the project, understand the market, and know how to make customers turn to you.
Describe the problem to be solved and demonstrate the size of the market niche and the target market for your business.
Use key indicators in your presentation: construction costs, the revenue you expect or already have, your expenses, your cash flows, and your returns.
Check our Self Storage Financial Model here for the construction, operations, and exit
Check our Self Storage Financial Model here for the acquisition, upgrade, operations, and exit
