What’s In Store for Self-Storage – A Guest Post from Llenrock Group
Apr 28, 2015
This post from Eric Hawthorn is part of our Llenrock Group guest post series and originally appeared on the Llenrock Group blog.
I was recently trolling Inside Self Storage‘s message boards, because that’s how I roll, and I came upon a conversation among several operators comparing notes on the effect of student populations on university-area self-storage facilities. Particularly of interest was the question of how much of an occupancy growth/decline occurs between facilities’ peak season and “off season.” Since we’re talking specifically about self-storage facilities that appeal to students, we can think of peak season as summer (when students require a few months of storage for their furniture and pot plants or whatever between semesters) and off season as winter months (though very short leases during winter break are a possibility), when students have less demand for storage space. Naturally, self-storage demand will vary by market and population, so what’s peak for one city may be an off season for another, depending on the consumer base.
Let me back up and look at the fundamentals driving self-storage demand and its rather meteoric rise in the wake of the recession.
- An aging population throughout the country means many elderly people and their families are moving furniture and other personal effects into fairly long-term storage as aging Americans move into retirement communities and smaller, simpler living environments.
- Increased urbanization and the growth of the multifamily sector has many millennial- and post-millennial-age apartment residents seeking additional space for their stuff (perhaps a substantial recovery in the housing market will take a toll on self-storage; this prospect doesn’t seem likely for the near future, though).
- The recession triggered an increase in university enrollment (undergraduate and graduate level), as poor employment markets are wont to do; an increase in universities’ student populations, which led to increased student housing demand, also boosted self-storage demand significantly in markets that host one or more university.
Today we’re considering the third factor in particular: the role of students and universities. Whether a small, private operator or large self-storage REIT like CubeSmart (NYSE: CUBE) and Public Storage (NYSE: PSA), it’s important to understand the student population and its trends in order to best capitalize on key student markets’ self-storage opportunities.
Consider this list of the largest public university campuses in the country (based on 2013-2014 school year enrollment):
10. Indiana University (Bloomington) – 46,817
9. University of Minnesota (Twin Cities) – 48,308
8. University of Florida (Gainesville) – 49,042
7. Michigan State University (East Lansing) – 49,300
6. University of Texas at Austin (Austin) – 51,145
5. Texas A&M (College Station) – 52,449
4. Florida International University (Miami) – 52,980
3. Ohio State University (Columbus) – 57,466
2. University of Central Florida (Orlando) – 59,770
1. Arizona State University (Tempe) – 60,168
Here we see a mix of large and smaller markets, all anchored by a major public university. We have more economically and demographically diverse markets represented here, with cities like Orlando, Miami, Austin, and the Twin Cities, and we have more education-focused “College Towns” (in the traditional sense) in the form of places like Gainesville, College Station, and East Lansing. A discussion of the needs and movements of university students is particularly relevant to these smaller campus towns, which lack the diversification of consumers that larger-city markets possess.
One commentator on the Inside Self Storage board, who identified as being an operator in Eugene, Oregon (definitely a college town) makes an interesting point, observing that over the past couple years some residential/student housing landlords are offering some kind of storage option for students going away for summer/winter break. This makes sense from the residential landlord’s point of view since it: 1) provides an additional revenue stream during the off season (i.e., the times between semesters) and 2) it ensures that the students/tenants will return to their property and extend their lease another year or another semester. For student housing landlords, this is a really strong strategy (and one that may become more common, though there hasn’t been much talk about it yet).
Should these self-storage operators be worried? Maybe not: self storage may offer more security than a residential landlord can provide, and a climate-controlled unit of 25 or 50 SF is something non-self-storage properties may struggle to provide.
Also, some enterprising self-storage companies are even offering pick-up and delivery options (not simply having a truck a customer can borrow), which makes this service far more attractive to the busy, car-less, or simply lazy.
Posted by: Raymond T. Cirz