The following was written by guest blogger Kris Benson.
We talk with a lot of investors everyday who ask us a simple question: “Why should I invest in self-storage?” Obviously, as a self-storage operator we are biased but there are three data points that we believe make this an ideal asset class for investors to evaluate for their own portfolios.
1. The Potential for Outstanding Returns
The first thing to look at is historical performance. According to the National Association of REIT (NAREIT)* the Self-Storage asset class has achieved an average annual return of 16.85 percent
over the past 25 years. Self-Storage has outperformed Apartments (12.93 percent), Retail (12.04 percent), Office (12.15 percent), and the S&P 500 (7.06 percent) over that same time period.
2. Downside Protection
I am a big believer that history repeats itself so I am always interested in the performance of an asset class in an economic downturn. According to that same NAREIT database, looking back at the last recession in 2007-2009, Self-Storage lost 3.86 percent in value versus Apartments (-6.72 percent), Retail (-12.32 percent), Office (-8.16 percent), and the S&P 500 (-21.10 percent). Even when downsizing, Americans do not seem to lose their appetite for storage.
3. Market Consolidation Opportunity
I also like to understand what the long term runway may be in a particular asset class. According to the 2019 Self-Storage Almanac
the publicly traded companies own less than 25 percent of the Self-Storage market. There is a consolidation opportunity for self-storage operators to acquire facilities owned by Mom and Pop operators and generate revenue enhancements by deploying a professional management strategy.
The performance, protection, and opportunity offered in the Self-Storage asset class could make it an attractive addition to many investors’ portfolios.
Kris Benson is the Chief Investment Officer of Reliant Real Estate Management. Reliant Real Estate headquartered in Roswell, GA is a vertically integrated commercial self-storage operator. Currently, Reliant is the 25th largest self-storage operator in the US with 53 properties owned across 8 states with just over 35,000 units and 4.5M rentable square feet. Reliant has sold another 21 properties and have achieved an average project level IRR net of fees of 45 percent with an average hold time of just over 3 years.
Kris Benson is not an employee of Equity Trust Company. Opinions or ideas expressed are not necessarily those of Equity Trust Company nor do they reflect their views or endorsement. These materials are for informational purposes only. Equity Trust Company, and their affiliates, representatives and officers do not provide legal or tax advice. Investing involves risk, including possible loss of principal.