Is Self-Storage a Smart Investment?

When new investors think about commercial real estate, they often picture apartment buildings, retail centers, or office space. But there’s another asset class that’s often overlooked—and it might surprise you.

I’m talking about self-storage.

It doesn’t always come to mind as a traditional CRE investment, but self-storage units have carved out a solid place in the market. In fact, over the last 20 years, this sector has grown rapidly. You’ve probably noticed them popping up in cities and towns all over the country. But the big question is—are they a good investment?

Let’s take a look at the pros and cons.

---

A Few Fast Facts About Self-Storage

Here’s something that might catch your eye: according to Bloomberg’s Riskless Return Rankings, self-storage REITs outperformed all other real estate investment trusts in terms of risk-adjusted returns during the ten-year stretch ending in 2012.

Now, buying stock in a REIT isn’t the same as owning a self-storage facility outright—but that data gives us a helpful peek into how profitable this niche can be.

Some more highlights from the U.S.-based Self-Storage Association:

• The average revenue per square foot is $1.12 for non-climate-controlled units, and $1.42 for those with climate control.

• A typical facility has about 46,000 square feet of rentable space.

• Roughly 9% of U.S. households rent a self-storage unit—up from just 6% less than 20 years ago.

• 27% of renters live in apartments or condos.

• And interestingly, most renters already have other storage options—garages, basements, attics—but still need more room.

• Nationwide occupancy rates hover around 85%.

Self-storage has come a long way from its roots. The Bekins family first launched the idea in 1889, which eventually evolved into the self-service model we know today.

---

Advantages of Investing in Self-Storage

Self-storage has a lot going for it—and not just the obvious perks like passive income, appreciation, and favorable tax treatment. Let’s dive into some of the standout benefits.

1. High Demand and Diversified Tenants

The demand for storage space tends to stay strong—sometimes even increasing during downturns when people are downsizing. You’re not relying on a few big tenants like in office or retail. Instead, you're spreading your risk across dozens (or hundreds) of renters.

2. Low Operating and Development Costs

Compared to apartments or office buildings, self-storage is often up to 50% cheaper to build. It’s also cheaper to operate and maintain. That means more profit potential.

3. Flexible Pricing

Most storage units are rented month-to-month, which allows you to adjust your rates more frequently based on demand. No need to wait years for a lease to expire like you would in retail or office.

4. Multiple Income Streams

You’re not just renting out space. Many self-storage operators also offer moving trucks, locks, boxes, insurance, and other upsells—more ways to boost your revenue.

5. Recession-Resistant

Believe it or not, economic downturns can actually help self-storage. When people move, downsize, or consolidate homes and businesses, they often turn to storage facilities.

---

More Self-Storage Advantages to Consider:

• Seller financing may be available (especially in smaller or privately-owned deals).

• About 30% of renters are businesses—providing stable long-term tenancy.

• Older buildings (like supermarkets or warehouses) can be converted into storage units.

• Great for mixed-use properties—blend storage with apartments, office, or industrial.

• Strong demand driven by over 40 million moves per year in the U.S.

• Easier and faster delinquency process compared to residential rentals.

• No rent control regulations apply.

• Limited capital improvements needed and minimal maintenance.

• Lower insurance costs due to reduced on-site activity.

• Expense ratios around 40–45% leave room for solid profit margins.

• Cap rates are typically about 2% higher than many other property types.

• Higher tenant count means less risk if a few units go vacant.

• Pairs well with apartment investing—great synergy if you already own residential properties.

---

Disadvantages of Investing in Self-Storage

As with any investment, there are trade-offs. While self-storage has plenty of upside, here are a few things to watch out for.

1. Increasing Competition

Because the industry looks attractive on paper, more investors are jumping in. That means competition is heating up—and you’ll need to do your homework before diving in.

2. Location is Critical

Storage units aren’t a “build it and they will come” situation. Proximity to users and easy access are key to keeping occupancy rates up. If you're considering new construction, make sure other nearby facilities are at 90–95% occupancy. If they’re not, the demand might not support another facility.

3. Zoning and Land Challenges

If you're building from the ground up, expect potential hurdles with land availability, zoning restrictions, and municipal approval processes.

4. Hands-On or Automated Management Required

Unless you automate, you’ll need on-site staff. And even with automation, you'll still need someone to oversee operations and customer service.

5. Legal Differences by State

Lien laws vary state-to-state, so make sure you understand the legal process for evictions and auctions in your market.

---

Are Self-Storage Units Worth It?

Self-storage can absolutely be worth it—if the numbers make sense and you do your due diligence.

The combination of low maintenance, flexible pricing, and high margins makes this asset class one of the most intriguing plays in commercial real estate. But don’t let that distract you from the essentials: location, competition, management, and market demand all need to be thoroughly evaluated.

If you’re looking for a manageable, income-generating property with solid upside, self-storage is worth a serious look.