Forget the phrase “as American as apple pie.” We should really be saying “as American as self storage.” While self storage isn’t unique to America, it certainly thrives here. Ninety percent of the world’s self storage is in the U.S. One out of every ten American households leased a storage locker somewhere at any given time.
Even self storage’s origin is categorically American: sons of immigrants leaving the farm to strike it rich in the big city. The first storage facility in America was created by Martin Bekius, who moved off his family farm to the nearby city of Grand Rapids to work as a teamster. Martin eventually changed his name to Bekins to sound less Dutch (his parents’ names were Sjoerd and Triertje) and founded Bekins Van Lines, one of the first companies to specialize in moving household goods and still one of the largest moving companies today. In a bid to show his clients how safe their possessions would be under the care of his company, Belkins developed large, fortress-like warehouses in highly visible areas. Eventually, they would start renting these out in a similar fashion to what we now call self storage.
Since then self storage has developed into a massive industry. Americans spend just under $40 billion on self storage annually; the total square footage of rental self storage space is 1.7 billion square feet, or 157 square miles, larger than the city of Denver, Colorado. For decades, storage facilities remained a “mom-and-pop” business until a number of large companies formed REITs in the 1990s. Now several publicly traded companies like Public Storage, Extra Space Storage, and CubeSmart control around 45 percent of the market. The rest of the market still has a plethora of small, local owners. However, a growing number of these small businesses are getting rolled up by private ownership groups.
The stable profitability of storage businesses, low-interest rates, and an inflationary environment has pushed storage real estate prices to new highs. The common saying is that the self storage market is created by the four Ds (Death, Divorce, Displacement, and Downsizing), leading to the idea that the market is recession-proof or at least recession-resistant. But the recent rate hikes and the subsequent slowdown of the economy might prove that wrong.
“Major life events drive self storage,” said Nick Huber, owner of Bolt Storage and host of The Sweaty Startup Podcast. “The last recession storage did really well because, unfortunately, people got kicked out of their home, but now people are staying put, they have cheap debt, they are not selling their house unless they have to.” All that has led to lower household formations and less, which is generally bad for self storage growth.
Huber has already seen a downturn in some of his properties, “One of our biggest locations had 47 units rented a few months ago,” he said, “usually it has 147.” But, he notes that some locations still seem unaffected. “We are still trying to figure it out, but we have a feeling that drive-by traffic almost always leads to a storage facility doing well.” Even in a world where Google is everyone’s first place for research, storage units are a purchase of necessity, so people seem to make the decision based on memory.
In that way, Martin Bekins was right. His model of building large, noticeable buildings easily visible from major thoroughfares is still in use by many self storage owners today. He also knew that one D in particular (Displacement), was a very American thing. “Moving is the American way,” Belkins is reported to have said often. Historically he was right, Americans move about four times more frequently than Europeans. But that might be changing. In 2021 Americans moved at their lowest rate since 1948. The most common reason that Americans move homes, 14.5 percent, is because they want a newer/better/larger house or apartment. The fifth most common reason, 8 percent, is because they want to move homes rather than renting.
|%||Top reasons American move, according to the 2020 Census Bureau|
|14.57%||Wanted newer/better/larger house or apartment|
|11.41%||New job or job transfer|
|10.65%||To establish own household|
|8.72%||Other family reason|
|7.82%||Went from renting to owning|
|6.64%||Wanted more affordable housing|
|6.34%||Other housing reason|
|6.13%||Change in marital status|
|5.13%||Relationship with unmarried partner|
|4.92%||Proximity to work or an easier commute|
|4.14%||Wanted a better neighborhood or less crime|
|3.15%||To attend or leave college|
Now that interest rates have made mortgages much more expensive and home prices have stayed stubbornly high, upgrading to a better house or buying one for the first time is less of an option for many. The prices of self storage properties have not budged much either. “Sellers are not willing to meet the market right now,” Huber said. “We acquired $60 million of property in the second half of 2021 and the first half of 2022. This year we are probably going to acquire ten percent of that.” Despite the softening market self storage properties are being developed or converted from other buildings across the country. Eventually, the industry’s growth will slow, but that might not affect well-positioned properties. There are only so many lots easily visible from heavily trafficked areas.
The popularity of self storage in the U.S. is particular because Americans, in general, already have large homes with plenty of storage. But even our large closets and garages are no match for our consumerism. Spending accounts for around 70 percent of the nation’s GDP, putting America in the top twenty countries in the world for this metric. But unlike other countries at the top of the list, like Guatemala and Moldova, Americans spend their money on discretionary items, not necessities. These items have gotten less expensive over the past few decades thanks to globalization harnessing cheap foreign labor. Still, American spending hasn’t dropped, meaning we get more stuff for our money than ever, even if we don’t have a place in our houses to put it.
America stands alone as the king of self storage. Our economy and culture have supported Americans’ ability not only to buy more things but to be able to afford a place to put them as well. But as entrenched as storage is in the American psyche, things might be changing. The younger generations have adopted a more minimalist approach to life, be it from personal preference for a more sustainable lifestyle or the economic pressure of less affordable goods. Self storage will always have a place in America, but this combination of rising prices and reduced relocations will challenge the idea that there will always be a market for it, no matter what is happening with the economy.