Storage spaces aren’t fetching as much in rent as traditional uses, but they are helping property owners cover their expenses.
The pandemic has left many offices, gyms, retail stores and restaurants closed for extended periods. Some enterprising landlords and tenants have found ways to fill space and recoup a little lost income in the process.
In San Francisco, a WeWork location saw many of its technology company tenants cancel their leases as employees began long-term remote work. So, the landlord of the building decided to rent out a floor of the building for storage.
“They did a full build-out, and they converted the whole space into an actual storage locker,” Neighbor.com CEO and co-founder Joseph Woodbury. “So it looks and feels very much like traditional self-storage.” Neighbor.com is a startup that focuses on repurposing and monetizing empty space for storage
In New York, a Thai restaurant went out of business in one space. The owner decided to rent it out as storage space. In Los Angeles, a gym owner suffering from COVID shutdowns rented out both his interior space and parking lot for storage.
“They didn’t have the capital to do some big storage build-out,” Woodbury says. “So their solution was as simple as just putting tape down on the floor to section off units.”
Woodbury says other landlords and tenants across the country are also monetizing their space by renting it out for storage. Soon after the COVID lockdowns began, Woodbury noticed commercial establishments, like restaurants, gyms, office buildings and retail locations, begin to list space for use.
The storage spaces aren’t fetching as much in rent as traditional uses, but they are helping property owners cover their expenses. “Those who want to deploy the capital [to build out space] are going to make a little extra money on each space,” Woodbury says. “So they’ll earn a higher return. Those who invest less in the space will have a little lower return.”
As the need for retail space and gyms has fallen, storage needs have increased, according to Woodbury. “Storage is always a little bit of a countercyclical asset class,” he says.
But COVID is different. Many people are leaving large cities and need a place to store their possessions.
“When moving activity skyrockets, so does storage because people need storage,” Woodbury says. “The other main driver of all the storage demand this past year has been that people are just spending a lot more time at home.”
As people set up home offices, they also need to find space for their possessions. “As they create that space in their home for a home office, where do they put the items that were previously there?,” Woodbury says. “They put them in storage.”
As people are home more often, they’re also finding the need to organize their space. “They may not be cleaning out space for a home office, but they’re just in their homes for a greater percentage of the day,” Woodbury says. “So they start organizing their homes. They pay more attention to the spaces where they live, and they end up putting items that they’re not going to be using into a storage facility to create a more clean and organized space.”