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Recession Proof Real Estate

Written by: Scott Meyers

Article Overview: They’re often called recession-proof – steady investments that are inexpensive and easy to maintain with consistent profit margins. Not to mention, they’re one area of real estate that seems mostly unaffected, if not helped, by current rough market conditions. They’re storage units and people always need them. And all across the country, with a growing population that provides a constant supply of people in transit and in need of storage, they’re shooting up everywhere. Storage facilities require relatively low building and management costs.

Recession Proof Real Estate

They’re often called recession-proof – steady investments that are inexpensive and easy to maintain with consistent profit margins.

Not to mention, they’re one area of real estate that seems mostly unaffected, if not helped, by current rough market conditions.

They’re storage units and people always need them. And all across the country, with a growing population that provides a constant supply of people in transit and in need of storage, they’re shooting up everywhere. Storage facilities require relatively low building and management costs.

Storage facility operators are capitalizing on a constant of modern culture: Americans own a lot of stuff. According to the Self Storage Association (SSA), self storage has been the fastest-growing sector of the U.S. commercial real estate market for the last 30 years, growing into a $220 billion industry. The rate of growth, however, has slowed somewhat over the past two years.

A slow housing market can actually help storage facilities, according to industry analysts and local facility operators. As the housing market slumps, people downsize their house sizes and some are even foreclosed upon. People like to hold on to their possessions, and with the same amount of things but less space to put them, they look to storage facilities. Also, hesitant homebuyers store their possessions as they watch what happens to the housing market.

By looking at demographic and growth trends, it’s clear why storage units are in such high demand. Population is growing and while people wait for their homes to be built or are searching for homes, they store away their belongings. Also, people with second homes here often store their large possessions like snowmobiles and RVs in units while they’re away. Wealthier people have more belongings and often rent out more spaces. Some just the basic concrete and metal sheds and others with climate-controlled heating systems. The climate-controlled units maintain a constant temperature of 58 degrees and are used for items vulnerable to the elements like wood and antiques.

Also, high fuel prices and economic slowdowns don’t generally deter wealthy people from enjoying their recreation and second homes.

Businesses use storage units too. Companies like the Old World Cabinet Company use the spaces as warehouses. With the high price of real estate in offices, sometimes it’s more economical to rent storage units than to buy up more space.

One concern for storage operators, though, is the potential for a flooded market. Overbuilding has been a problem for storage facilities across the nation, but most areas have avoided this trend.

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Article Tags: commercial real estate, investing, real estate, self storage



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