From Caterpillar to Butterfly – Steve Williams looks at the emergence of self-storage as an investible asset
March 7, 2023
Like a good wine, the US self-storage sector has taken almost seven decades to evolve from a lowly caterpillar in the business park to an elegant butterfly on Main Street. How did this happen?
Self-storage units as a light industrial land use, first appeared in the 1960’s. Families moving to small sunshine homes in the sunshine states of Florida, Texas and California needed secure, offsite, storage for surplus or seasonal belongings.
Soon, row upon row of tin-roofed sheds each with a padlocked roll-shutter door, sprang up on back lots in local business parks. It is no exaggeration to say that the ability to store large occasional-use items, ushered in a golden age of consumerism.
By the turn of the century several major shifts had occurred. First, self-storage operators, many now national in scope, developed high-tech ways of marketing, leasing, and managing multiple units. Increased profitability meant that the national brands could afford to compete for prime sites on busy urban corridors. Elegant two- and three-story, structures began to appear sitting comfortably alongside their office and retail neighbors.
Bigger and better units, many with indoor corridors and climate control. offered safe, clean, storage for everything from traditional household goods to specialty items like RV’s, boats, classic vehicles, antiques, art, and even vintage wines. A new class of upmarket tenant were also in the market for ancillary on-site services like packing and moving, insurance, and even a store-and-deliver pod service.
In the past decade, the sector has come of age as an alternative asset class attracting both debt and equity allocations from the most respected institutional players. Today, US REITs fund eight of the ten largest self-storage operators. A butterfly has emerged from the chrysalis to spread it wings along Main Street.