The Opportunity Is Now
A lot has changed in real estate over the past 10 years, and even more in the last 10 months. Retailers that were the gold standard in 2011 are now gone. Entire asset classes last office and retail are in question. What are they worth? Will demand come back? While no longer a secret, there is one asset type the continues to push strong: self-storage.
Fun Facts about Storage:
- The least foreclosed upon of all asset types (Capital Preservation)
- Experienced the lowestamountof rental drops over the last two recessions (Income)
- Quickest rental rate recovery of all asset types (Growth)
“Self-Storage is recession-resistant because demand is based on life events and not on the stock market .”
Will We Continue to Need Storage in the Future?
Yes. I believe we will. Americans love to buy things. In fact, after 9/11, the President told the American people to go out and buy stuff. Help the economy where you can. With the rise of Amazon, we can now get things delivered to our doors in two days or less. This will only feed the need for storing our accumulated possessions.
The Biggest Problem in Self-Storage Is Self-Storage
The biggest problems owners face is new construction from other developers. The new supply increases vacancy and lowers pricing. We see this largely in bigger markets. To combat this problem, we target smaller secondary and rural markets where there is much less growth. CubeSmart is simply not going to build a 3-story $8 million property in many of the markets we buy in. In effect, the smaller market is our moat.
Cash Flow from Day 1
We buy storage businesses that are cash flowing from Day 1. Yep, that’s right. Statically 50% of businesses fail by year 5. We are buying a storage business with a 10+-year track record, often with little to no technology.
How Do We Add Value?
We incorporate the latest in technology—such as a new website, SEO marketing, Google homepage—and upgrade the exterior.
· Old World: Manager calls the tenants when they are late on rent, then prints and mails a certified letter.
· New World: Our software automatically sends customers a text about upcoming payments. If the customer is 5 days late, the gate code is automatically switched off.
I have received several compliments from customers saying, “I love the ease of payment features.”
Well, we do too, and we love the increased bottom line.
Self-storage is the intersection of real estate and business. There is no other real estate asset type that has the levers you can pull to drive value and increase investor returns.
Why Now?
Fifteen years ago, 75% of multi-family apartments were owned by mom-and-pop investors and 25% were owned by institutions. Now that number has flipped. Today, 75% of storage businesses are owned by mom-and-pop investors and 25% are owned by institutions. I predict this will flip again in the next seven years. As current owners sell, the next generation of owners will do the very things I am talking about and create the value for themselves.
The opportunity is now.
