• Tue. Jun 18th, 2024

Self Storage Found To Be A Risk-Free Investment


Feb 5, 2024

Self Storage Found To Be A Risk-Free Investment

Buying a piece of real estate is always a good investment wherever you are. If you are planning to choose this path, there’s one type of property that you can invest in which has less risk. We’re talking about the self storage.

Bloomberg reports in its recent Riskless Return Ranking that self storage companies produced the best risk-adjusted return. The report covered 10 real estate investment trust indexes in the U.S. in the past 10 years. Compared to offices, hotels and warehouses, self storage facilities recorded the highest total return and the third-lowest volatility.

Investing in self storage also has low risks. For one thing, a single move-out will not affect the cash flow. Other factors are its minimal collection losses and multiple profit areas.

Among the major facilities, CubeSmart, Public Storage, Extra Space Storage Inc. and Sovran Self Storage Inc. experienced a steady cash-flow growth and gained investors that had low debt ratios. In terms of revenue, Extra Space Storage revealed its funds for the first quarter of 2012 went up by 41 percent. The others have yet to report their earnings.

Experts in the self storage industry foresee a rise in demand and occupancy as well as rents in the coming year. Occupancy is expected to go up by one to three percentage points while rents will increase by three to 3.5 percent. This forecast is based on the survey of Cushman & Wakefield covering some 7,000 facilities in the U.S.

Compared to 2011, median occupancy went up from 80 percent to 81.1 percent. Rental fees were also up from $88 to $90 for a unit measuring 10 feet by 10 feet.

Self storage units are very useful to people regardless of their status in life. Renting a storage space is normally based on various factors but primarily on a life changing situation that requires people to move places. These include graduating from college, changing jobs, going through divorce or a death in the family.

Rental units often range from as small as five foot by five foot to bigger ones measuring 25 feet by 25 feet. And while some companies own their buildings, there are others that actually rent space by the month.

In the U.S. alone, data gathered in 2011 showed that there are now 50,048 self storage facilities. The number is up from almost 30,000 in 1999. Facilities have also grown from having an average of 243 units back in 2000 to 566 units each in 2011.

Many investors have ventured into self storage to take advantage of people’s need for a safe place to keep their valuable and old personal belongings. There’s a consistent demand for storage space rentals in recent years and this has led the industry to fare much better than traditional commercial real estate investments.

The self storage sector has been considered recession proof owing to the inexpensive and easy-to-maintain investments plus significant profit margins it enjoys. Amid financial crises, the industry has also been unaffected. The Self Storage Association (SSA) has also confirmed that this particular sector enjoys a rapid growth among the commercial real estate market.

By Lucille