COVID-19 Hits Self-Storage, But Market Is 'Resilient'
"While there is disruption in the overall economy, the need for self-storage space will continue and address changing needs by users," the Cushman & Wakefield report said.
The coronavirus pandemic has depressed rental activity in the $39 billion self-storage space and some tenants could vacate units, Cushman & Wakefield said in a midyear national report published this week.
The market analysis predicted “near-term shocks” to net operating income, “including flattening or declining rental rates for the remainder of the year.”
“The increase in delinquency rates in April were not as pronounced as the market feared with the true impact to surface in May and June,” according to the Cushman & Wakefield report, whose authors included vice chairman Michael Mele; Luke Elliott, executive managing director; and Chris Owen, director of Florida research. “COVID-19 related declines in traffic and leasing, as well as a rise in collections will have an immediate impact.”
The authors predicted “move in rental rates to drop for the remainder of 2020 and overall NOI to remain flat or slightly down on stabilized same store revenue.” Still, the report said, “while there is disruption in the overall economy, the need for self-storage space will continue and address changing needs by users.”
The new report said “self-storage remains relatively resilient with minimal fundamental changes to underlying drivers of demand in the long-term.”
The self-storage market was an “upward trajectory” before the pandemic hit, Mele wrote in a blog post. The U.S. Census Bureau reported a 584% increase in construction spending in the sector from January 2015 to January 2020, according to the report.
“Self-storage had a tremendous amount of growth in recent years in terms of new construction and investor interest. As inventory increased, a growing number of first-time self-storage investors dove into this niche sector,” Mele wrote.
Advantages in the self-storage market include “increased household penetration, strong population growth in the U.S., and the sector’s resilience compared to other asset classes,” the Cushman & Wakefield report said.
The authors said they expected the self-storage sector to return to higher levels as states begin to scale back some of their COVID-19 restrictions.
Dallas is the country’s top self-storage market by number of facilities, according to the report, and rounding out the top five are Houston, New York, Chicago and Los Angeles.