Apartments Drive Growth in Self Storage
- Jun 01, 2021
Self storage facilities have become as American as Motherhood and Apple Pie. And ubiquitous, too.
There are now more self storage locations than every Best Buy, Lowe’s, Home Depot, Walmart, McDonald’s and Subway stores put together, according to a new report from RentCafe.
Self storage in the United States has grown to an impressive 1.5 billion square feet. And 20 percent of that—more than 295 million square feet—was added in the last decade. Indeed, the 10-year, 2011-‘20 period was the third-most active decade ever, the report says.
But that last statistic is somewhat misleading, for after starting off slowly during the early years of the past decade, self storage construction took off during the final years. The biggest year was in 2018, when more than 57 million square feet came online.
The reasons are varied. But in large part, RentCafe says it was driven by the recent boom in apartments. For example, Dallas and New York not only gained the most apartments during the period, the two metro areas also saw the delivery of the most self storage space.
Add to the surge in multifamily housing the fact that the business is “closely related” to such life events as moving, home improvement, downsizing and changes in household composition and “you have the perfect context for a flourishing industry that’s poised for even more development,” RentCafe predicts.
Even when apartment construction slowed a bit after the 2018 surge, self storage continued to flourish, with demand, the report says, coming from both traditional sources as well as new ones. And even when the pandemic disrupted all economic sectors, “self storage emerged relatively unscathed.”
Moving was a strong driver, as it always is, as people relocated to places outside of major urban centers in an effort to either escape the virus or find new employment—or to do both. But many employers also needed places where they could store their office and restaurant equipment to allow for social distancing.
Not every metropolitan area started the 2011-‘20 period at the same point. Some were hugely under supplied. But as their needs grew, developers responded. In Milwaukee, the stock grew 68 percent by adding some 4 million square feet, the largest inventory expansion of the decade.
But the 10 most active markets matched up to places where apartment construction was strong.
In Dallas, 173,000 apartments were added, as was 16.2 million square feet of self storage space. In New York, where 146,000 apartments were built, so was 15.7 million feet of storage. Another hot apartment market, Houston, gained 125,000 new units as well as 14 million square feet of self storage.
According to the report, despite the big increase in storage space, the Big Apple is still woefully under supplied. The region has just 3.3 million square feet of self storage space per capita, well under the national benchmark of 7 million square feet.
Furthermore, rents in the city are now $185 month on average, surpassed only by those in Honolulu ($260), San Francisco ($208) and Los Angeles ($193). Between 2017 and 2021, the street rate for space rose 12 percent in Oxnard, Calif., from $154 to $172, followed by New York (11 percent) and Honolulu (10 percent).
On the flip side, in Houston, which has nearly 11 square feet per person, the street rate is just $86.
Other big gainers in terms of self storage construction over the last decade were Chicago with 11.3 million square feet, a 31 percent increase in inventory and 65,000 new apartment units; Phoenix with 8.7 million feet, a 35 percent jump and 58,000 new apartments; Atlanta with 8.2 million feet, a 27 percent increase with 79,000 new units, and Miami with 8.1 million feet, a 27 percent boost in inventory with 88,900 more apartments.
At the same time, Austin recorded almost a 52 percent increase in self storage space during the period, while Denver saw nearly a 50 percent jump.