Self-Storage - The Ultimate Investment Vehicle
Self-Storage - The Ultimate Investment Vehicle
The self-storage
industry is often overlooked because it does not have the appeal of a
gleaming office building or ritzy shopping mall. For income producing
real estate, self-storage is one of the easiest, cheapest and highest yielding
types of property. The investment community has taken notice of self-storage as
a viable commercial real estate asset class, and the underlying dynamics
continue to fuel the sector’s success. It has become a multi-billion
dollar industry because of the growing residential and industrial population
which calls for a rising demand for self-storage facilities.
Due to the traditional mom and
pop operation, many owners of self-storage are unaware of the tremendous
opportunity in their hands. If you own a self-storage property and are
considering selling or have not been experiencing the tremendous income benefits, speak to Pacific Coast Commercial's property management team who specializes in this industry. Our team has the ability to successfully manage your asset and provide you with stable
cash flow every month. With solid recent past
performance and upward trending occupancies and rental rates, we encourage you
not to sell your recession resistant asset in this growing yet
consolidating market. Read more to understand why self-storage is a viable income asset.
WHY
SELF-STORAGE?
IN
COMPARISON TO OTHER REAL-ESTATE INVESTMENTS
Office: 13.26%
Why is there a
substantial difference in success and annual return between self storage and other real estate?
What are the key elements that give self storage the extra edge for surviving
tough economic times? The first thing an investor must understand is what
happens to the end user–residential and commercial customers–during the swings
in a market’s economy.
THE
END USER
On the commercial side, increased business activity means an
increased volume of self storage commercial tenants. Conversely, when the
economy starts to falter, the same happens to business, employment and real
estate in general. However, the reverse effect still causes the same mobility
that most often benefits self storage. People begin moving out of the market or
selling their homes and moving into smaller homes or apartments.
Commercial businesses downsize or look to self storage for a
more economic means for storing inventories. A staggering economy does have a
negative impact on self storage, but look at how self storage properties
compare to other real estate. During downswings in the economy, multifamily
occupancies drop as much as 25 percent, while office and retail occupancies
drop as much as 30 percent. Who are the office and retail tenants? Businesses
that have either failed, downsized operations and moved to a cheaper property,
or completely moved to another market. This is lost income to office and retail
properties, and it is not recovered until the market’s economy improves.
Self storage will also have an initial drop in occupancy, which
differs from one market to another, but usually averages between 15 percent and
20 percent. However, a typical leverage self storage property has a break-even
occupancy rate between 60 percent and 72 percent. Compare this to leveraged
multifamily, office and retail properties with a break-even occupancy rate
between 80 percent and 90 percent. Which real-estate investment has more room
to absorb market declines?
RENTS
Self storage rents fall within the range of other real estate.
It is not uncommon for customers to pay the same or more per square foot for
storage as they do for living in an apartment. This rent comparison is even
more enlightening when comparing rents to average development cost per type of
real estate.
When comparing both rents and total development costs, self
storage most often has rents that are slightly less. But self storage has a
total development cost that is a third to one-half that of multifamily, office
or retail properties. To the investor, this means a considerable less
investment or loan amount to be serviced while having comparable rents to other
real-estate investments.
There are apartment “make-readies” and interior remodeling for
new office and retail tenants. In comparison, self storage usually has one or
two managers and very few of the maintenance “headaches” associated with “live-in”
tenants. In general, a self storage investor has very few of the problems
associated with other real estate.
The “bottom line” in comparing self storage to other real-estate
investments is that the investor can realize much higher ROI for the typical self-storage
property than for other real-estate investments. Secondly, the investor’s
initial investment is a third or one-half that required by other real-estate
investments. Due to the lower break-even occupancies, the investor should
anticipate investment cash flow sooner and a much lower element of risk in
relation to economic declines and their effect on lower occupancies and rents.
The investor does not have to worry about additional capital requirements
relating to tenant improvements or continual maintenance.
The advantages for
investing in self storage mentioned above have been and will continue to be the
key elements for its success. The self storage industry’s future is very
bright. The industry will continue to mature along with demand for its use.
Those investors who venture into self storage will discover what the industry
pioneers did 30 years ago: Self storage is one of the best investment vehicles
available in this country, now and in the future.
Do not do yourself an injustice by selling your self-storage property, instead, look to Pacific Coast Commercial's property managers to maintain and handle all functions of your asset while providing you with stable annual cash flow. Contact our team to learn information about how we can and will increase your bottom line.
Contact
(619) 369-4600 For all Inquiries
DISCLAIMER: This blog/article has
been curated from an alternate source and is designed for informational
purposes to highlight the commercial real estate market. It solely represents
the opinion of the specific blogger/author and does not necessarily represent
the opinion of Pacific Coast Commercial.
All content provided on
this blog is for informational purposes only. The owner of this blog makes no
representations as to the accuracy or completeness of any information on this
site or found by following any link on this site. The owner of will not
be liable for any errors or omissions in this information nor for the
availability of this information. The owner will not be liable for any
losses, injuries, or damages from the display or use of this information.
Keywords:
San Diego Commercial Real Estate For Sale, Commercial Property In San Diego,
Commercial Real Estate In San Diego, San Diego Investment Real Estate, Commercial
Property Management In San Diego, San Diego Commercial Property Management,
Commercial Property Management San Diego, Managed Commercial Property San
Diego, Commercial Property For Sale San Diego, San Diego Commercial Real
Estate Leasing, Top Real Estate Agents in San Diego, Commercial Property in
San Diego, Property Management Company San Diego, Real Estate Agent in San
Diego, Credit, Credit Score, Accountability, Credibility, Capital,
Collateral, Team Work, Community, Character, Capacity, Conditions,
Accounting, Credit Report, Website, Listings, Luxury, SAles and Leasing ,
multifamily
The self-storage
industry is often overlooked because it does not have the appeal of a
gleaming office building or ritzy shopping mall. For income producing
real estate, self-storage is one of the easiest, cheapest and highest yielding
types of property. The investment community has taken notice of self-storage as
a viable commercial real estate asset class, and the underlying dynamics
continue to fuel the sector’s success. It has become a multi-billion
dollar industry because of the growing residential and industrial population
which calls for a rising demand for self-storage facilities.
Due to the traditional mom and
pop operation, many owners of self-storage are unaware of the tremendous
opportunity in their hands. If you own a self-storage property and are
considering selling or have not been experiencing the tremendous income benefits, speak to Pacific Coast Commercial's property management team who specializes in this industry. Our team has the ability to successfully manage your asset and provide you with stable
cash flow every month. With solid recent past
performance and upward trending occupancies and rental rates, we encourage you
not to sell your recession resistant asset in this growing yet
consolidating market. Read more to understand why self-storage is a viable income asset.
WHY
SELF-STORAGE?
What draws investors
to the self-storage industry is its "high returns, low maintenance"
reward. Many investors prefer self-storage over residential or alternative commercial
real estate because it is basic, logical and presents low risk. It is a fixed investment
with very little fluidity, yet the investor can become creative to maximize
profitability. There was a time when people didn't perceive self-storage as a
real business at all, but when the demand for storage grew in the 90's, it has
intensified the call for a steady demand for self-storage units.
Just think about it.
The land that is used to build storage facilities is usually cheap although
zoned commercial. It is usually not good for building a housing development,
not good for retail commercial shopping centers and not good for office
buildings or apartments. It is commercial land that no one else wants and
therefore is relatively cheap compared with prime commercial real estate. The
buildings themselves are also very cheap. Plain metal buildings with hardly any
plumbing, often no insulation, concrete floors, no windows, no trim, no kitchen
countertops and no hardwood or marble tiles.
With low cost land,
low cost building and low maintenance, storage units remain one of the easiest
and best ways to create passive income in real estate. These are often
mentioned among students of Robert Kiyosaki as well as T. Harv Eker's
Millionaire School as being a desirable investment.
IN
COMPARISON TO OTHER REAL-ESTATE INVESTMENTS
One of the best ways to compare real-estate investments is to
look at the performance of self storage and other real-estate investments
during the past decade. According to the
National Association of REIT the self-storage sector
produced an average annual return of 17.43% from 1994 – 2017. For
comparison here are the returns from some other REIT sectors during that same
time:
Office: 13.26%
Retail: 12.75%
Industrial 13.36%
Residential: 13.42%
Apartments: 13.32%
Manufactured Homes:
13.27%
Mortgage: 11.18%
S&P 500: 7.54%
Why is there a
substantial difference in success and annual return between self storage and other real estate?
What are the key elements that give self storage the extra edge for surviving
tough economic times? The first thing an investor must understand is what
happens to the end user–residential and commercial customers–during the swings
in a market’s economy.
THE
END USER
During times when a market is experiencing an economic recovery,
business begins to thrive, employment opportunities increase and the sales of
new and existing single-family homes start to climb. One would expect self
storage properties to do well; most often, they do. An evaluation of typical
self storage property rent rolls during this time would usually show a high
percentage of mobile customers–people moving into the market for the first time
or customers “buying up” from starter homes.
On the commercial side, increased business activity means an
increased volume of self storage commercial tenants. Conversely, when the
economy starts to falter, the same happens to business, employment and real
estate in general. However, the reverse effect still causes the same mobility
that most often benefits self storage. People begin moving out of the market or
selling their homes and moving into smaller homes or apartments.
Commercial businesses downsize or look to self storage for a
more economic means for storing inventories. A staggering economy does have a
negative impact on self storage, but look at how self storage properties
compare to other real estate. During downswings in the economy, multifamily
occupancies drop as much as 25 percent, while office and retail occupancies
drop as much as 30 percent. Who are the office and retail tenants? Businesses
that have either failed, downsized operations and moved to a cheaper property,
or completely moved to another market. This is lost income to office and retail
properties, and it is not recovered until the market’s economy improves.
Self storage will also have an initial drop in occupancy, which
differs from one market to another, but usually averages between 15 percent and
20 percent. However, a typical leverage self storage property has a break-even
occupancy rate between 60 percent and 72 percent. Compare this to leveraged
multifamily, office and retail properties with a break-even occupancy rate
between 80 percent and 90 percent. Which real-estate investment has more room
to absorb market declines?
RENTS
Rents are another key to the success of self storage properties.
Self storage rents fall within the range of other real estate.
It is not uncommon for customers to pay the same or more per square foot for
storage as they do for living in an apartment. This rent comparison is even
more enlightening when comparing rents to average development cost per type of
real estate.
When comparing both rents and total development costs, self
storage most often has rents that are slightly less. But self storage has a
total development cost that is a third to one-half that of multifamily, office
or retail properties. To the investor, this means a considerable less
investment or loan amount to be serviced while having comparable rents to other
real-estate investments.
There are apartment “make-readies” and interior remodeling for
new office and retail tenants. In comparison, self storage usually has one or
two managers and very few of the maintenance “headaches” associated with “live-in”
tenants. In general, a self storage investor has very few of the problems
associated with other real estate.
The “bottom line” in comparing self storage to other real-estate
investments is that the investor can realize much higher ROI for the typical self-storage
property than for other real-estate investments. Secondly, the investor’s
initial investment is a third or one-half that required by other real-estate
investments. Due to the lower break-even occupancies, the investor should
anticipate investment cash flow sooner and a much lower element of risk in
relation to economic declines and their effect on lower occupancies and rents.
The investor does not have to worry about additional capital requirements
relating to tenant improvements or continual maintenance.
The advantages for
investing in self storage mentioned above have been and will continue to be the
key elements for its success. The self storage industry’s future is very
bright. The industry will continue to mature along with demand for its use.
Those investors who venture into self storage will discover what the industry
pioneers did 30 years ago: Self storage is one of the best investment vehicles
available in this country, now and in the future.
Do not do yourself an injustice by selling your self-storage property, instead, look to Pacific Coast Commercial's property managers to maintain and handle all functions of your asset while providing you with stable annual cash flow. Contact our team to learn information about how we can and will increase your bottom line.
Do not do yourself an injustice by selling your self-storage property, instead, look to Pacific Coast Commercial's property managers to maintain and handle all functions of your asset while providing you with stable annual cash flow. Contact our team to learn information about how we can and will increase your bottom line.
Contact
(619) 369-4600 For all Inquiries
DISCLAIMER: This blog/article has
been curated from an alternate source and is designed for informational
purposes to highlight the commercial real estate market. It solely represents
the opinion of the specific blogger/author and does not necessarily represent
the opinion of Pacific Coast Commercial.
All content provided on
this blog is for informational purposes only. The owner of this blog makes no
representations as to the accuracy or completeness of any information on this
site or found by following any link on this site. The owner of will not
be liable for any errors or omissions in this information nor for the
availability of this information. The owner will not be liable for any
losses, injuries, or damages from the display or use of this information.
Keywords:
San Diego Commercial Real Estate For Sale, Commercial Property In San Diego,
Commercial Real Estate In San Diego, San Diego Investment Real Estate, Commercial
Property Management In San Diego, San Diego Commercial Property Management,
Commercial Property Management San Diego, Managed Commercial Property San
Diego, Commercial Property For Sale San Diego, San Diego Commercial Real
Estate Leasing, Top Real Estate Agents in San Diego, Commercial Property in
San Diego, Property Management Company San Diego, Real Estate Agent in San
Diego, Credit, Credit Score, Accountability, Credibility, Capital,
Collateral, Team Work, Community, Character, Capacity, Conditions,
Accounting, Credit Report, Website, Listings, Luxury, SAles and Leasing ,
multifamily
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