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Invest in self-storage

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Portfolio diversification

Portfolio diversification is vital to a successful investment strategy. ‘Diversification’ is the key word here and self‑storage is a differentiating asset class compared to the more traditional real estate asset classes such as office, commercial and industrial.

Extra Space Self Storage, Singapore - example of drive-up unitWhy self‑storage is a good diversification solution

Self‑storage brings some unique benefits that deliver a robust financial proposal and illustrate why self‑storage is a good diversification solution:

  • Diverse renter base
    A mix of residential and small business users with a multitude of reasons to rent a self‑storage unit, e.g. relocation, renovation, limited space, estate probate, etc.
  • Low dependency on single big renters
    Facilities have huge numbers of renters and, in a reliable, stabilised facility, there is usually a waiting list.
  • Rental rate adjustment frequency
    Rent adjustments can happen monthly instead of waiting months or years for a traditional lease to end.
  • Strong stabilisation characteristics
    A well‑positioned and marketed self‑storage facility will often grow at one unit per day. Once stabilised, the customer mix will evolve to long‑term renters over the remaining life of the business as the initial short‑term renters are replaced by long‑term renters.
  • Low overhead costs, maintenance exposure and on‑going capex needs once a self‑storage facility is built
    A typical facility will have one or two daytime sales staff and maybe a security guard at night. With nearly maintenance free self‑storage building components and low traffic and utility use, up-keep is remarkably low.
  • Relative resistance to recession
    Self‑storage has proven to be one of, if not the most, recession resilient businesses. When economies slow, there are many reasons people use self‑storage — space issues, downsize home, must relocate and store possessions, etc…
  • Minialmacenes, San Fernando de Henares, SpainLow impact due to non‑paying tenants
    The ability to quickly remove and replace non‑paying tenants is a well‑known feature of the industry, thus ensuring productive assets down to the unit level.
  • Use properties that are not in high in demand
    Old buildings are some of the best investments for self‑storage. When procuring buildings you will find a relatively quiet competitive environment allowing the savvy investor to secure some real gems.

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