Sep
29

Self-Storage Sector Surging Amid Improving Economy

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According to Marcus & Millichap, the national self-storage sector steams into the second half of 2014 following several quarters of strengthening property operations. Space demand is growing significantly in conjunction with an expanding economy, while restrained supply growth persists. Recently, the exceptional property performance posted by self-storage REITs has brought greater attention to the sector and raised its stature among commercial real estate investors. Self-storage has long been cited as a sound portfolio diversifier by large multifaceted investors and is a source of livelihood and wealth creation for small local investors. Improving economic conditions will support a favorable climate for transactions, while the near-term outlook for further strengthening in vacancy and rent growth is promising.

To date, the robust performance of self-storage properties is primarily driven by growing space demand. After hunkering down during the recession, U.S. consumers are clearly back in an accumulation phase, buying new things that will inevitably relegate older possessions to self-storage spaces around the country. On a year-over-year basis, sales of items such as sporting goods, apparel, furniture and appliances increased nearly 3 percent. U.S. consumption continues to grow at a healthy pace despite only modest gains in disposable income and a lower reliance on credit-card debt. Further strengthening in the job market and low inflation will sustain retail spending and enable consumers to continue to purchase more items.

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