Gen X is the demographic using the most self-storage units as the sector continues to enjoy a boom sparked by pandemic-driven renter preferences and migration changes.
A recent RentCafe survey of 4,200 renters reveals that currently, about 21% of renters are using self-storage, while another 12% intend to use it in the future. And Gen Xers are the biggest users of self-storage, with 44% reporting they currently use units and 21% declaring an intention to use self-storage in the near future. Gen X is followed by baby boomers, with 38% reporting an interest in self storage. Around 30% of the millennial cohort use self-storage.
“As a service largely responding to life events, self storage is becoming increasingly popular. The recent need to carve out space at home for home offices or gyms, plus an increase in multigenerational living, have joined the traditional reasons for using self storage including growing families, living with roommates, moving and downsizing,” says RentCafe’s Maria Gatea.
Around 44 million households in the US, or 36%, are renters, according to RentCafe. Moving is the most frequent reason survey respondents reported using self-storage, with 42% renting a unit while switching homes, while 31% say their current space is too small for their belongings. But the amount of space is not necessarily a driver for usage: about 28% of the renters in 3-bedroom homes need a storage unit for their extra belongings, compared to only 20% of the renters in studio apartments.
“While this might sound counterintuitive at first glance, it is essentially a matter of household composition, as bigger rentals generally house more family members with diverse storage needs,” Gatea says. “Additionally, in the current economic and job market context, it is very likely that at least one of the adults is working from home, adding extra pressure to the living space.
The 5’x10’ and 10’x10’ unit sizes are most popular, according to the RentCafe survey.
The sector is on a tear as of late: “once regarded as a niche real estate sector, is on a strong growth path in 2022,” Doug Ressler, business intelligence manager at Yardi Matrix, told RentCafe, adding that occupancy rates at self storage facilities across the country increased to 94.5% in 2021 from 91% in pre-pandemic 2019. Self storage street rates are also on an upward trend nationally, with the average monthly rent for a 10′x10′ self storage unit rising 4% year-over-year this June to $132, according to Yardi Matrix.
However, some headwinds remain as social behaviors normalize and demand drivers soften. Analysts from Marcus & Millichap report that the the average asking rent for a standard 10-by-10 unit in June was up 15% compared to year-end 2019, while vacancy contracted over the same period by 190 basis points to 6.6%. The firm’s 2022 forecast sees self-storage vacancy rise on an annual basis for the first time since the onset of the pandemic to hit 7.25%, an increase of 60 basis points year over year. However, lifestyle changes wrought by the pandemic are still expected to keep unit availability “well below” pre-2020 levels, they say. Construction is also at a five-year low.
Significant cap rate compression could also impact the sector, experts say.
“Capital costs are climbing, impacting terms. Banks, ranging from local to national in scope, continue to be the most active lenders in the space, but are likely to favor borrowers with whom they have an established relationship with,” the Marcus & Millichap report notes. “The owner-user structure common in many privately owned self-storage properties may also align more with bank and credit union preferences in the event of an economic slowdown. Lenders have generally tightened underwriting criteria, with individual asset quality and location continuing to be differentiating factors.”