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
What is the ownership demographics of self storage?
Of the ~52,000 self storage facilities in the U.S., only 22% are owned by the 6 large REITS, and another 13% are owned by the next 100 largest operations. This leaves about 65% of facilities owned by “mom & pop” operators.
Is self storage subject to eviction laws?
Self storage is not guided by eviction laws. Self storage is guided by lien (property) law as opposed to eviction (tenant) law. This means self storage “loses” less days than any asset class that physically has people in it. When a renter is late on payment, their gate passcode is deactivated and/or their unit is over-locked. They are notified of their past due balance and if the delinquent unit does not come current, local lien law timelines are adhered to for the auction process. Typically, the lien and auction timeline allows for the recovery of balances owed and new rental to a paying tenant within 60 days.
Is the lien and auction timeline the same nationwide?
No, the lien and auction timeline is NOT the same nationwide. Each state has their own requirements for the lien and auction process. Typically, there are requirements of notification, a time period where the tenant has the ability to come current on balances owed, followed by public notice of auction, and then the sale of stored goods. Typically, the lien and auction timeline allows for the recovery of balances owed and new rental to a paying tenant within 60 days.
What is the break-even occupancy needed for self storage?
Un-leveraged self storage facilities have break-even occupancy figures in the low to mid 30% occupancy range. Leveraged assets have break-even occupancy figures in the low to mid 60% occupancy range. This is partially due to much lower overhead because of no “tenants, toilets, and trash”.
What is a reactive pricing model?
With self storage, you can adjust pricing based on real time supply and demand. When a certain type of unit (ex. 10’ x 10’) is in low supply in the market/facility, the pricing can raise by as much as 50%+ and tenants may still rent them. Conversely, when a certain type of unit is in high supply in the market/facility, the pricing can decrease in order to encourage rentals. While this may seem like a basic concept, it’s not one that is as easily implemented in other real estate assets like multifamily, and certainly not to the same premium as available to self storage.
Is rental income the only revenue stream available to a self storage facility?
Self storage facilities implement a large number of ancillary revenue streams. In addition to unit rentals, a facility can experience income from packing and moving supplies, lock sales, truck rentals, business center income, renters insurance commissions, vehicle parking, cell tower leases, billboard advertisements, and more.
What is the current demand for self-storage units?
The current demand for self-storage units varies depending on various factors such as location, market conditions, and economic trends. Generally, the self-storage industry has seen stable and consistent growth in recent years, driven by factors such as urbanization, lifestyle changes, and the growth of e-commerce. As of 2020, 10.6% of U.S households rent self storage. This is up from 9.4% in 2017. This provides a huge opportunity for growth since in theory, if we were to go from 1 in 10 households using self storage to 2 in 10 households, the national supply of storage facilities would need to potentially double. This sort of growth potential does not exist in many other real estate asset types.
What is the average occupancy rate for self storage?
The average occupancy rate of self-storage facilities varies depending on location, market conditions, and other factors. Typically, the average occupancy rate for self-storage facilities is between 80-90%. However, it is not uncommon for occupancy rates to fluctuate based on seasonal changes and local economic conditions. The self-storage industry as a whole has been stable and consistently growing, with high occupancy rates reflecting the growing demand for storage space.
According to the Self Storage Almanac and Radius+, as of 2022, the national occupancy was 93.4%.
What is the average rental rate for a self-storage unit?
The average rental rate for a self-storage unit varies greatly depending on factors such as location, unit size, and market conditions. On a national level, the average monthly rental rate for a standard 10x10 self-storage unit ranges from $50 to $200, with rates tending to be higher in urban areas and lower in rural areas. It is important to note that rental rates can fluctuate and can be affected by supply and demand, local economic conditions, and competition in the area.
According to Radius+, as of Q2 2022, historical national rental rates for non-temperature controlled units were as follows:
$56.65 for 5’x5’
$78.32 for 5’x10’
$120.13 for 10’x10’
$152.40 for 10’x15’
$177.45 for 10’x20’
As of Q2 2022, historical national rental rates for temperature controlled units were as follows:
$66.02 for 5’x5’
$98.83 for 5’x10’
$155.68 for 10’x10’
$203.77 for 10’x15’
$268.99 for 10’x20’
What is the market competition like for self storage?
The market competition for self-storage varies depending on location and the number of facilities in the area. In some markets, there is high competition among self-storage operators, while in others, there is limited competition. Competition can affect rental rates, occupancy rates, and the overall performance of self-storage facilities. The self-storage industry has seen significant growth in recent years, with new operators entering the market and existing operators expanding their portfolios. This growth has led to increased competition in some markets, which has driven innovation and improvements in the self-storage product offering.
According to Mini-Storage Messenger, in 2022 there were 51,206 self storage facilities up from 50,523 in 2021.
What is the typical size of a self-storage unit?
Self-storage units come in a range of sizes to accommodate different storage needs. The most common sizes for self-storage units are 5’x5’, 5’x10’, 10’x10’, 10’x15’, and 10’x20’, but larger units (such as 10’x30’ or larger) are also available. The size of the unit needed will depend on the amount and type of items being stored. Most self-storage facilities offer a variety of unit sizes to accommodate different storage needs, and many offer flexible month-to-month rental options to allow customers to adjust the size of their unit as their storage needs change.
According to the Self Storage Association 2020 Self Storage Demand Study, these are the percentages of various unit sizes rented:
15.6% 5’x5’
20% 5’x10’
24.4% 10’x10’
14.8% 10’x15’
12.5% 10’x20’
12.7% 10’x30’ or larger
What is the default rate for self-storage tenants?
The default rate for self-storage tenants, also known as the non-payment or delinquency rate, is a measure of the number of tenants who fail to pay their rent on time. The default rate for self-storage tenants can vary depending on a number of factors such as the economic climate, competition in the market, and the creditworthiness of tenants. On average, the default rate for self-storage tenants is low, typically less than 5%. This is because self-storage tenants are typically required to pay a deposit and provide credit or debit card information to secure their rental, which acts as a deterrent to default. In addition, self-storage operators often have processes in place to manage delinquent accounts and enforce payment, which helps to minimize the default rate. However, it is important to note that the default rate can fluctuate and can be affected by local economic conditions and the overall health of the self-storage market.
How is self-storage revenue generated?
Self-storage revenue is generated primarily through rental income from tenants. This rental income is typically collected on a monthly basis and is based on the size of the rental unit and the rental rate in the market. In addition to rental income, some self-storage facilities may generate revenue from additional services such as insurance, truck rentals, and retail sales of moving and storage supplies. Some facilities may also generate revenue from late fees, auction proceeds, and other charges related to delinquent accounts. Overall, self-storage revenue is a combination of rental income and income from ancillary services, and it can be influenced by factors such as occupancy rates, rental rates, competition in the market, and local economic conditions.
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.
What is the typical operating expense ratio for self-storage?
The typical operating expense ratio for self-storage facilities ranges from 30% to 55% of gross operating income. Operating expenses for self-storage facilities can include property taxes, insurance, utilities, maintenance and repairs, management fees, marketing and advertising, legal and professional fees, and payroll. The exact operating expense ratio for a self-storage facility will depend on a number of factors such as the size and location of the facility, local economic conditions, and competition in the market. In general, a lower operating expense ratio is desirable as it indicates that a larger portion of revenue is being retained as net income. It is important to note that the operating expense ratio is just one metric used to measure the financial performance of a self-storage facility, and a more comprehensive analysis should consider factors such as occupancy rates, rental rates, and cash flow.
According to the 2022 Self-Storage Expense Guidebook by MiniCo Insurance Agency, the national average operating expense ratio for 2022 was 41.79%.
What is the typical cap rate for self-storage?
The typical cap rate for self-storage facilities ranges from 6% to 9%, but can be higher or lower depending on a number of factors such as location, competition, and the overall health of the self-storage market. The cap rate is a measure of the rate of return on investment that an owner can expect from a self-storage facility and is calculated as the net operating income divided by the purchase price. A higher cap rate indicates a higher return on investment, and a lower cap rate indicates a lower return. Factors that can impact the cap rate for self-storage facilities include the local real estate market, competition, occupancy rates, rental rates, and operating expenses. It is important to note that the cap rate is just one metric used to measure the financial performance of a self-storage facility, and a more comprehensive analysis should consider factors such as cash flow, occupancy rates, and rental rates.
What is the typical net operating income for self-storage?
The typical net operating income (NOI) for self-storage facilities varies widely depending on a number of factors such as location, competition, occupancy rates, rental rates, and operating expenses. On average, the NOI for self-storage facilities ranges from $7 to $25 per square foot, but can be higher or lower depending on market conditions. The NOI is calculated as the gross operating income minus the operating expenses and is a measure of the profitability of a self-storage facility. A higher NOI indicates a more profitable facility, and a lower NOI indicates a less profitable facility. Factors that can impact the NOI for self-storage facilities include occupancy rates, rental rates, operating expenses, competition, and local economic conditions.
According to the 2022 Self-Storage Expense Guidebook by MiniCo Insurance Agency, the national average net operating income was $8 per square foot.
How does self-storage compare to other real estate investments?
Self-storage can be compared to other real estate investments in terms of investment return, risk, and stability.
Investment return: On an individual facility level, self-storage has historically provided solid returns for investors, with returns typically ranging from 6% to 9% based on the cap rate. However, returns will vary based on location, competition, occupancy rates, and operating expenses. On a macro economics level, 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.
Risk: On an individual facility level, the level of risk for self-storage is relatively low compared to other types of real estate investments. The demand for self-storage is generally stable and not tied to the performance of the broader economy. Additionally, self-storage tenants typically sign lease agreements, which provides a steady stream of rental income. However, as with any real estate investment, the value of the property can be impacted by economic downturns, changes in competition, or local zoning regulations. On a macro level, 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.
Stability: Self-storage is considered a stable real estate investment due to the consistent demand for storage space. Even during economic downturns, the demand for self-storage typically remains strong as people downsize or move to new locations. The stable demand and predictable rental income make self-storage a relatively stable investment compared to other types of real estate.
Overall, self-storage can be a solid real estate investment for those looking for a lower-risk, stable investment with solid returns. However, as with any investment, it is important to thoroughly research the market, competition, and local economic conditions before making a decision.
What is the impact of technology on the self-storage industry?
Technology is having a significant impact on the self-storage industry, with new innovations changing the way that customers interact with storage facilities, and the way that facilities are managed and operated. Some of the key ways that technology is impacting the self-storage industry include:
Online Rentals and Reservations: Customers can now easily find and rent storage units online, making the process of finding and reserving a unit more convenient and efficient. This has also made it easier for self-storage facilities to manage their occupancy levels and pricing.
Mobile Access and Control: With the advent of mobile apps and other technology, customers can now access and control their storage units remotely, without having to visit the facility in person. This has made self-storage even more convenient for customers who are on the go.
Smart Storage Units: Some self-storage facilities are now offering "smart storage" units that allow customers to remotely monitor temperature and humidity levels, as well as lock and unlock the unit from their mobile device.
Automated Payment and Billing: Self-storage facilities can now automate payment and billing processes, making it easier for both customers and facility managers to manage payments and invoices.
Inventory Management: Technology is also being used to improve inventory management and optimize occupancy levels. For example, some facilities are using data analytics and predictive algorithms to better forecast demand and set pricing.
In general, technology is making the self-storage industry more efficient, convenient, and customer-friendly, and is helping facilities better manage their operations and maximize profits.
What is the future outlook for the self-storage industry?
The future outlook for the self-storage industry is generally positive, as demand for storage space is expected to continue to grow. Some of the factors that are expected to drive growth in the self-storage industry in the coming years include:
Population Growth: As the population grows, demand for storage space is expected to increase, as people need more space to store their belongings. As of 2020, there is only 10.6% penetration meaning that 1 in 10 US households use self storage. There is an immense opportunity for that penetration rate to increase agnostic of population growth itself.
Urbanization: As cities become more densely populated, many people are downsizing their living spaces and turning to self-storage as a solution for their extra belongings.
E-commerce: The growth of e-commerce is expected to drive demand for self-storage, as more and more people order goods online and need somewhere to store them.
Innovations in Technology: Advances in technology are expected to continue to shape the self-storage industry, making it more convenient, efficient, and customer-friendly.
Investment Opportunities: The self-storage industry is seen as a relatively stable investment opportunity, with low default rates and predictable rental income. 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. Self storage is recession resilient. 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.
While there are some challenges facing the self-storage industry, such as increased competition and changes in local zoning regulations, the overall outlook is positive. As long as demand for storage space continues to grow, the self-storage industry is expected to remain a thriving sector of the economy.