Photo by JOSHUA COLEMAN on Unsplash
Self storage is reckoned to be a durable industry, providing a valuable service in both good times and bad. It helps people move, store excess belongings, and downsize easily when economics are weaker. Investors have therefore taken a liking to the sector, and despite some oversaturation find profitable locations for new facilities. 2018 was the best year ever in terms of delivering storage space. The pace of new construction slowed down in 2019 but delivery levels were still elevated with approx. 1.2 million sq. ft. of storage space having been added to Chicago’s inventory. As a natural consequence, street rates declined as operators sought to maintain occupancy rates in the face of stronger competition.
The Chicago self storage sector recently exhibited unusual tendencies compared to some other densely populated regions. While 2017 and 2018 were bumper years for self storage construction in places such as New York–Newark–Jersey City and Dallas–Fort Worth–Arlington, Chicago–Naperville–Elgin saw a decline in activity. In 2016, the Chicago area saw over 2 million new rentable sq. ft. on the market, almost three times what was built in the previous year, but this was down to around 1.5M sq. ft. in 2017, and a further drop was recorded in 2018.
Reductions in street rates for standard 10×10 non-climate-controlled storage units have mirrored this trend in the Chicago area, falling -6.2%, -3.8%, -1% and -5% in the years from 2016 to 2020. However, investor confidence has clearly not gone away as, according to Yardi Matrix data, 18 new storage facilities should be completed by the end of 2020, encompassing over 1.1 million sq. ft. In addition, another 14 storage facilities are planned for 2021 and 2022.
The self storage industry may have been affected by COVID-19, but it has been less impacted than other real estate sectors. In May 2020, the amount of self storage space planned or under construction, as a percentage of existing inventory, was holding steady in the Chicago area. Street rates in Chicago for a standard unit are now $96, a -5% change from 2019, but others have not changed. Overall, the indications are that the sector is sufficiently resilient and is coming to the aid of Chicagoans when they need it.
Read “Self Storage Market Pushes Forward Amid Lowering Rents and COVID-19 Fears” here.