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Self-Storage Industry Update

                                                                                                                                                              

Last year marked the 11th year of this economic cycle, the longest stretch of economic growth that we have ever seen in U.S. history.  The good news for the economy in 2020 is that a recession is unlikely barring some shock like war, a terrorist attack or a natural disaster.  The bad news is GDP will moderate continuing last year’s trend of gradual slowing.  Expect growth of 1.9%, down from 2.3% in 2019 and 2018’s brisk 2.9% pace.  The second half of 2020 will be better than the first.  Interest rates are still historically low and indications are the Federal Reserve will not be making any changes by either cutting the interest rate or hiking the rate.  Inflation remains in check running at about a 2.2% level.  There’s ample capital looking for investments.  The economy remains in a great place giving no reason to fret about the end of the good times.

The self-storage sector has undergone substantial changes over the past several years.  This includes a condensed period of elevated construction, new technology allowing 24 hour access, less direct interaction with the customer through the internet including leasing units and making rent payments.

Today most self-storage facilities sell for cap rates of 5.5 percent to 8 percent depending upon the age, physical condition and market competition with the average being a 6 percent return.  Lifestyle changes and shifting demographics are expected to bolster demand, supporting a positive outlook for owners and investors and sustaining the flow of capital into the sector.