Core Benefits of Investing In Self-Storage

Published on
November 8, 2023
Core Benefits of Investing In Self-Storage

The Strategic Advantage of Self-Storage Investments

As self-storage operators, we acknowledge our bias, but there are three compelling data points that make the self-storage asset class an excellent choice for any investor looking to diversify their portfolio.

Exceptional Historical Returns: A Look at 25 Years of Performance

Outstanding Returns: Historical performance is a critical aspect for every investor to consider. According to data from the National Association of REIT (NAREIT)*, the self-storage asset class has demonstrated an impressive average annual return of 16.85% over the past 25 years. Remarkably, self-storage has outperformed other asset classes during this period, including Apartments (12.93%), Retail (12.04%), Office (12.15%), and even the S&P 500 (7.06%).

Resilient Through Economic Cycles: Self-Storage’s Downside Protection

Downside Protection: Evaluating an asset class's performance during economic downturns is prudent. Looking back at the last recession in 2007-2009, the NAREIT database shows that self-storage experienced a mere -3.86% decline in value. In comparison, Apartments suffered a more significant decline at -6.72%, Retail faced a substantial setback at -12.32%, Office properties experienced an 8.16% dip, and the S&P 500 endured a substantial decline of -21.10%. This data suggests that even during tough economic times, there remains consistent demand for self-storage facilities, making it a reliable option for investors seeking downside protection.

The Untapped Growth of Market Consolidation

Market Consolidation Opportunity: Long-term growth potential is essential to consider when evaluating an asset class. The 2019 Self-Storage Almanac highlights a fascinating aspect of the self-storage market—publicly traded companies own less than 25% of the overall market. This indicates a significant consolidation opportunity for self-storage operators to acquire facilities owned by individual, smaller operators (often referred to as "mom and pop" operators). By implementing professional management strategies, these operators can enhance revenue and optimize the acquired facilities' performance. This market consolidation presents an attractive prospect for investors, as it opens up potential for growth and increased profitability.

Why Self-Storage Should Be in Your Investment Radar

In conclusion, self-storage offers outstanding historical returns, reliable downside protection even during economic downturns, and a promising market consolidation opportunity. These three compelling data points make self-storage a compelling asset class for investors seeking stable and lucrative investment options.

Travis Baucom
Owner, Balcomie Capital

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