Self-Storage Investment Returns

Five Reasons to Invest in Self-Storage

1.  Market Demand
The high demand for self-storage facilities makes them attractive to investment groups, ensuring good resale value, a profitable exit strategy and a solid return on your investment.

2. Minimal Labor Required
A self-storage business can be operated with two people.

3. Easy Expansion
Adding more storage units to existing structures or developing new sites is relatively fast and simple compared to other real estate properties. This makes expanding your self-storage facilities an efficient and cost-effective strategy to significantly boost both your storage capacity and your revenue.

4. Asset Appreciation
Unlike other real properties, self-storage properties often appreciate over time, contributing significantly to your long-term ROI and providing a valuable asset in your investment portfolio. Since they generally require lower operational and maintenance costs than other real estate properties, investing in self-storage facilities is a cost-effective strategy to enhance your potential for profitability.

5. Easy and Profitable Exit
Self-storage properties with a proven track record for generating income tend to attract higher bids from prospective buyers, putting you in a favorable economic position at resale time.

Industry Statistics

The annual income from owning storage units can range from $365,000 to $800,000. However, how much money you make hinges on several factors, such as the facility’s location and size, whether or not you had to take out a loan to buy it, and the range of services you offer.

Owners of storage facility businesses typically earn a yearly profit of $184,500. Naturally the potential payoff for each storage unit facility will vary based on the facility’s size, local rental market, and operational efficiency. The $184,500 mentioned is based on an average annual rental rate of $9 per square foot, an average storage unit facility size of 50,000 square feet, and a profit margin of around 41%. Source:  Storganise

Today, 38% of Americans rent a self-storage unit. In part due to typical life events, including the 4 D’s Death, Divorce, Downsizing, and Dislocation
Source: Storage Cafe

In 2001-2023 the average return on self-storage was 20.87%, and in 2006-2021 it was 18.76%
Source: Forbes

In 2022, the US self-storage industry’s revenue reached $39.5 billion, with an average occupancy rate of 92%. Moreover, the industry boasts an impressive average profit margin of 41%. The numbers speak for themselves, indicating a highly profitable business.

The self-storage industry is not only profitable but also poised for continual growth. Forecasts suggest the self-storage business will expand by more than 5% annually through 2027.
Source: Secure Space

The United States Self-Storage Market size is estimated at USD 44.33 billion in 2024, and is expected to reach USD 50.01 billion by 2029, growing at a CAGR of 2.44% during the forecast period (2024-2029).
Source: https://www.mordorintelligence.com/industry-reports/united-states-self-storage-market

Selling a small "mom and pop" self-storage business to a larger competitor can involve several key considerations, backed by industry trends and statistics:

Market Consolidation

• Trend: The self-storage industry has been experiencing consolidation, with larger operators and REITs (Real Estate Investment Trusts) increasingly acquiring smaller operators.
• Statistic: Large operators and REITs account for about 30% of the self-storage market in the U.S., with the rest controlled by independent owners (like "mom and pop" businesses). This presents significant acquisition opportunities for larger players.
  Source: https://skyviewadvisors.com/self-storage-reit-report-q4-2023/

Valuation Multiples

• Trend: Small self-storage businesses typically sell at lower valuation multiples compared to larger, institutional-grade facilities.
• Statistic: The sale price for small self-storage businesses usually ranges from 5 to 8 times the net operating income (NOI), while larger, more established facilities might sell for 10 to 15 times NOI.
  Source: https://www.silverhillinvestments.com/self-storage-resources/how-to-value-a-self-storage-facility

Buyer Motivation

• Trend: Larger competitors are motivated to acquire smaller facilities to expand their footprint, achieve economies of scale, and increase market share.
• Statistic: Many REITs and large operators report acquiring small facilities to grow their portfolios, often targeting smaller markets where they do not yet have a presence.

Operational Efficiency

• Trend: Large operators often bring operational efficiencies, including better technology, marketing, and rental rate strategies, which can increase revenue post-acquisition.
• Statistic: Large operators can reduce operational costs by up to 20% through better resource utilization, economies of scale, and advanced management practices.
  Source: https://www.forecast.app/blog/improving-operational-efficiency

Exit Strategies for Owners

• Trend: Small business owners often choose to sell to large competitors to capitalize on the high demand and favorable market conditions.
• Statistic: Over 75% of small self-storage business owners consider selling when approached by a larger competitor, as they can secure a favorable exit in a competitive market.
  Source: https://nextlevelincome.com/the-pros-cons-of-self-storage-investing-by-kris-bennett/

These statistics highlight the dynamics of selling a small self-storage business in a market increasingly dominated by larger players.

Learn more about how self-storage investment returns can be maximized through stable income, low operating costs, scalability, and tax benefits by contacting us today!