New Self-Storage Demand Will Outpace Supply

New self-storage demand is expected to outpace supply. For the last several years, strong self-storage demand has spurred self-storage construction. The construction levels have caused some concern that the supply would outpace demand; however, new demand trends show that demand is growing faster than supply can keep up.

“Forbes expects the demand for self-storage to continue to increase, but new supply could outpace it thanks to the flurry of new construction. Industry analysts predict this will cause a decline in the high returns enjoyed by some of the biggest industry players, which could in turn lead to lower rental prices as operators compete for new business,” Dave Hettinger, senior national account manager at Motili, tells GlobeSt.com.

In some markets, the supply-demand imbalance is ensured by limits on new development. “Municipalities around the United States are placing a cap on self-storage growth. For example, New York enacted a zoning freeze in 2019, so it takes two years to obtain permission to build new facilities,” says Hettinger. “The increase in restrictions might result in increased rental prices if demand continues to increase and the additional supply is hindered. City officials cited lack of space and displacement of businesses that would use the space to create more jobs.”

The expansion of the self-storage industry is a global trend, but the largest market is in North America. “The storage industry expansion has impacted worldwide markets that share common factors,” says Hettinger. “The largest self-storage market might be in North America, but the fastest growing is the Asia-Pacific market. And, not surprisingly, revenues for the storage industry are expected to decline for the remainder of 2020, as economic activity continues to be impacted by the COVID-19 pandemic. While IBISWorld expects profit margins to fall, they still will remain high.”

However, downsizing communities will continue to fuel demand, particularly in major metros. “The self-storage market continues to be robust, in the US and in other locales, as well,” says Hettinger. “As communities downsize and look for places to store their belongings, their parents’ memories and even seek additional spaces for business inventory, self-storage will continue to be an important business sector.”