2018 Reflections | Self-Storage New Years Update
2018 was an incredible year for the Self-Storage industry… Newly developed properties and REIT acquisitions. New regulations and tax laws have changed consumer behavior. In the Property Protection industry, one big case established the difference between protection plans and insurance. The growing economy and generation shifts have made their mark… We’re hitting the high and low of the past 12 months and what this year has to look forward to.
2018 By the Numbers
- REITs have started slowing down acquisitions – At the beginning of 2018 flipping self-storage facilities was one of the hottest trends, but as the year progressed supply started to outgrow demand.
- Rental costs are on the rise – In the G5 State of the Industry report, it is noted: “Nationally, the industry is looking at a 1.7 percent increase in rental costs to $1.21 per square foot.1 This number will, of course, vary based on your market.”
- Tax reform may impact occupancy rate – With more cash in their pockets, it’s easier than ever for consumers to choose to rent a storage unit to keep pace with their increased spending habits.
- Vacancy rates decreased – While 2018 saw a decrease in vacancies the trend may or may not continue through 2019 as several factors that are causing this number may change through the new year.
2018 Insurance and Protection Plans
In May the California Supreme court ruled to affirms both lower court’s decision that tenant protection plans are not insurance. This was a huge-big deal for tenant property protection plan providers. The implications of the ruling confirm what those in the protection plan industry have always believed, that protection plans function different from insurance plans and therefore shouldn’t be regulated in the same way. This means the owners that choose to partner with a protection plan provider like us are able to make more profit and avoid extensive (and expensive) training and licensure than those who offer insurance.
2018 Generational Influence
Millennials are moving out and into rentals and homeownership, baby boomers are starting to retire and the market is shifting to address the shift of influence. Storage Owners who appeal to the unique generational tendencies of these two groups are inevitably going to see the benefits.
2019 What to Expect
The target market for most owners is shifting. The industry is adjusting to the changes in the economy. And protection plans are more profitable than ever…
Overall, there’s still growing demand for self-storage, *just as we expected*. Of course, supply has begun to catch up, so it’s not a matter of the growth bubble bursting, more of a slow fade to the insane rise in demand for self-storage unit availability.
This is the year to focus on the data. Find out who your target market has become since last year and what floats their boat. Then take that knowledge and apply it to your 2019 renovations (or updates) budget in order to focus your attention on what matters most to your tenants.
Increasing your profitability and decreasing vacancy rates will require a digital transformation of some kind. Americans have embraced technology more this last year than they had in the past. Even Baby-boomers are seeing the value of technological conveniences. That being said, the ‘human touch’ of well trained managers will continue to convert leads into renters. And don’t forget that offering and selling Protection Plans, is still the best way to add to your profit.
Of course sending yourself and/or your managers to industry expos will continue to be one of the best ways to keep a finger on the pulse of the industry and stay on top of everything. Which expos are you planning to attend in 2019?