Did you notice how the government didn’t place rent restrictions, moratoriums, etc. on self-storage during the pandemic? That’s because they not focused on someone’s stuff that has been collecting dust for years sitting in a metal box. While single and multi-family landlords have been feeling the heat, self-storage is gaining popularity as an alternative asset class that plays by its own set of rules. Retail and institutional investors alike are turning to storage to invest large amounts of capital in, whether actively or passively due to many benefits which are becoming more widely known.
Why Diversify?
If you’re like many Americans, you may be hesitant to place large amounts of capital into the stock market, as many are predicting a correction is on the horizon. With talk of inflation and rising interest rates, many people are looking to move money to hard assets that do well in both economic booms and busts. An interest rate increases of just a point or two can significantly affect both monthly payments and total payments over a loan’s lifetime, and residential and multifamily investors are starting to pay close attention. Diversified portfolios have been proven to produce higher long-term returns, with less risk, than any individual investment type.
Recession-resistant asset class
While 2020 forced difficult changes for most commercial real estate assets, storage was an easy adaptor to digitized operations. Storage has a track record of being a great performer both in economic upturns and downturns, and during the last two recessions, self-storage was one of the top performing asset classes. The COVID-19 pandemic over the last year and a half has been no exception. With storage facilities pivoting to contactless bookings and savvy online software, customers can book and pay online without ever seeing a real person, and the process has never been easier. In addition, autopayments have cut down on delinquencies in some instances as well.
Storage rates on the rise
Storage can be a lucrative business with long term customer retention and therefore steady cashflow for the average stabilized operating environment. According to Yardi Matrix, rental rates have grown 12.4% year over year nationwide for climate-controlled units and 10.4% for non-climate-controlled units. Experts don’t see this number trending downward anytime soon, and customers aren’t willing to move out of their unit for an extra $10-20 a month increase.
Busy W-2 professionals and savvy investors looking for cash flow or long-term equity gain are diversifying their portfolio with storage. If you’re looking for a great source of passive income within an asset class that is recession resistant, can be run with less overhead and manpower, and is trending upward, then take a deeper look into storage and consider it as your next portfolio addition. Learn more about passive storage investments and view our open offerings at spartan-investors.com.
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