A Recession Proof Opportunity
Self-storage has become one of the fastest growing segments of commercial real estate, and is considered ‘recession resistant,’ noted the Self Storage Association. So when I learned that self-storage supply in Miami-Fort Lauderdale-West Palm Beach is below the national average, my ears perked up.
Who wouldn’t get excited about this?
After years of commercial real estate investing, I can’t just ignore this.
In fact, according to Palm Beach Post:
“Nationwide, self-storage supply is estimated at 8.3 square feet per capita,” the company says. “The self-storage supply in the Miami-Fort Lauderdale-West Palm Beach MSA is well-below the national average at 5.2 square feet per capita. It also falls well below the state average of 9.4 square feet per capita.”
“At least one developer sees opportunity, though. Elite Stor last year paid $750,000 for a former mattress warehouse at 1016 Clare Ave. in West Palm Beach. It says its 20,000-square-foot, high-tech storage facility opens this month.”
There could be substantial opportunity here.
Better yet, according to the U.S. Census Bureau, the population of those 65 and older is expected to just about double between now and 2060, from 43 million to 92 million. With kids leaving home, and an aging population looking to potentially downsize, a generation of boomers may just need a place to store their things.
We also have a millennial generation with low home ownership rates being destroyed by an overhang of student debt and a lack of necessary down payment. They need a place to store their things, as well.
At the same time, according to Patrick Newport, an economist at IHS Global Insight, as quoted by Reuters, "We are becoming more of a rental society. It's becoming harder to own a home. People who lost their homes to foreclosure are now renting and credit standards have tightened significantly."
That means there are a lot of people looking to store their things until their situations improve.
Just look at the performance of related storage stocks for an idea of how explosive the space is.
Since December 2013, Extra Storage (NYSE:EXR) has run from $40 to $70.
Public Storage (NYSE:PSA) ran from $150 to $205.
Cube Smart (NYSE:CUBE) has exploded from $15 to $26.
These are exciting times for commercial real estate.