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March 15, 2020
The Coronavirus pandemic will impact the self-storage industry, like it will impact all real estate types to varying degrees. The growing demand for self-storage was precipitated by a decade of steady job creation and wage growth and has bolstered household formations and lifted consumer spending, two key dimensions of self-storage demand. The rental lifestyle, bolstered by the rising cost of home ownership paired with Millennials’ and Gen-X’ers preference for urban living, created a premium for space as many members of this generation have been living experience-oriented and health-conscious lifestyles, pursuing outdoor activities like kayaking and skiing even when they do not have the space at home to store the related equipment. The workers of these generations are the ones who are now disproportionately impacted by the job losses wrought by the COVID-19 crisis. As young workers move back in with their parents or move in with each other to share costs, their excess personal items, furniture and other household goods will need to be stored until things improve and we again see new household formations. Further, the likelihood of many small businesses permanently closing is high according to experts in this field. Closing businesses will have a storage need for fixtures, furniture, equipment and unsold inventory. With “stay-at-home” orders in place across the country, unlike normal times, there may be no opportunity for “going out of business” sales to reduce unsold inventory prior to closing. Both of these trends will increase demand for self-storage in the short-to-medium-term.
Looking beyond the current Coronavirus pandemic, self-storage demand will be augmented by a greater number of people passing retirement age. As aging baby boomers downsize, storage space will become more necessary for heirlooms and belongings they hope to pass on to younger generations.
With the likelihood of more big-box retail store closings as companies suffer from the current crisis, Global Storage Partners, an affiliate of Global Building, plans to aggressively continue pursuing suitable storage conversion opportunities. The conversion of vacant big-box retail space into self-storage remains a prominent trend, with conversions offering a less costly option compared with ground-up construction. According to Marcus & Millichap, a leading real estate brokerage firm, more than 8 million square feet of space is expected to be converted to self-storage this year across roughly 50 markets. Global Storage Partners will strive to play an increasingly active role in this investment arena.