SSSE’s core values are Fun, Integrity, Drive, and Others-First. As part of our commitment to Others-First, we strive to educate our investors, partners, and the general public about self storage. The Roman philosopher Seneca once said, “Luck is what happens when preparation meets opportunity”. This Frequently Asked Questions page is to serve as preparation for anyone interested in learning more about self storage and SSSE. The opportunities come when you sign up for SSSE’s investors list or buyers list by clicking the links in our menu bar. We hope to be lucky enough to work together.
If there are any questions that you have that are not answered below, please contact info@ssse.com
Do banks like to loan on self storage?
From 2011-2018, self storage had the lowest default rate of any real estate asset class. When those rare few properties did default, the banks only lost an average of 1.52% per default. According to Trepp, a Commercial Mortgage Backed Securities research firm, of the 1,700 CMBS loans made to self storage in the first 3 quarters of 2020 only 3 were delinquent– that is a 0.17% delinquency rate . During the same time multi-family was defaulting at a rate 1,800% higher or 18x that of self storage. Lending on self storage is one of the safest loans a bank can make.
What is the typical revenue per square foot for a self-storage facility?
The typical revenue per square foot for a self-storage facility varies depending on a number of factors such as location, competition, occupancy rates, and the mix of unit sizes. On average, the revenue per square foot for self-storage facilities ranges from $10 to $25, but can be higher or lower depending on market conditions. Higher revenue per square foot typically indicates a more profitable facility, but there are many factors that can influence revenue per square foot, including rental rates, occupancy rates, competition, local economic conditions, and the cost of operating the facility. It is important to note that revenue per square foot is just one metric used to measure the performance of a self-storage facility, and a more comprehensive analysis of financial performance should consider factors such as operating expenses, occupancy rates, and cash flow.
According to the 2022 Self-Storage Expense Guidebook by MiniCo Insurance Agency, the national average effective gross income per square foot for 2022 was $13.75.
Which real estate asset class performs best in a recession?
It is difficult to determine which real estate asset class will perform best during a recession, as real estate markets are influenced by many factors, including the overall economy, local market conditions, and the specific asset type. However, the following 4 asset classes are generally considered to be more resilient during a recession, with one clear winner.
Essential use properties: Properties with essential uses such as supermarkets, drug stores, and grocery stores tend to be more resilient during a recession as people still need to purchase necessities even during tough economic times.
Multi-Family Housing: The demand for rental housing typically remains relatively stable during a recession, making multi-family housing a relatively safe investment during tough economic times.
Industrial Properties: Industrial properties such as warehouses and distribution centers are often less affected by a recession, as the demand for goods and services continues even during a downturn.
Self-Storage: Self-storage facilities are considered to be the most recession resilient real estate asset. People may need to store their belongings due to downsizing or other economic factors. Historically, self storage has performed the best of any real estate asset in recessions. From 2007-2009, self-storage dropped -3.8% in comparison to the S&P’s -22.0%. This was the smallest drop of any real estate asset class. Self storage had some of its best performing years during the COVID-19 Pandemic when some other real estate asset classes performed poorly. According to Trepp, a Commercial Mortgage Backed Securities research firm, of the 1,700 CMBS loans made to self storage in the first 3 quarters of 2020 only 3 were delinquent– that is a 0.17% delinquency rate . During the same time multi-family was defaulting at a rate 1,800% higher or 18x that of self storage. Self storage has the highest return on investment in comparison to any other real estate asset class. From 1994-2017, storage returned an annual average of 17.43%. Based on that annual average, $100,000 invested in 1994 would be over $4,000,000 today.
It is important to note that real estate performance during a recession can vary widely depending on the specific asset and market conditions. Additionally, a recession can result in a decrease in property values, which may impact real estate investors negatively. It is always advisable to conduct thorough research and consult with a professional before making any real estate investment decisions.