In today's ever-changing economic landscape, finding recession-resistant investments is a priority for many. One sector that has consistently demonstrated its resilience, especially in the thriving Sunbelt region, is the self-storage industry. Lets dive into why self storage is exceptionally recession-resistant, particularly in today's market, and how it has thrived in the Sunbelt states.
Minimal Economic Impact
One of the key reasons why self-storage is so recession-resistant is its minimal economic sensitivity. Unlike other real estate sectors such as commercial or residential properties, self-storage facilities are not as heavily influenced by market fluctuations. People require storage solutions regardless of economic conditions. During recessions, individuals and businesses often seek out cost-effective storage options as they downsize, relocate, or restructure their operations.
Non-Cyclical Demand
The demand for self-storage is driven by various life events and circumstances, making it non-cyclical in nature. Whether it's a family in transition, a business in need of additional space, or a student in search of temporary storage, the need for storage units remains steady regardless of economic conditions. This consistent demand provides a stable foundation for self-storage businesses.
Lifestyle Changes and Urbanization
The Sunbelt region, encompassing states in the southern United States, has experienced rapid population growth due to factors such as favorable climates, lower cost of living, and robust job markets. As more people move to these areas, they often require temporary storage solutions during transitions. Whether it's a move to a new city, downsizing, or renovating a home, self storage facilities in the Sunbelt are well-positioned to cater to these needs.
Flexibility and Affordability
Self-storage offers flexibility that other real estate investments may not. Customers can rent units on a month-to-month basis, allowing them to adjust their storage needs as circumstances change. This adaptability makes self-storage an attractive option for individuals and businesses alike. Additionally, compared to other real estate investments, self-storage facilities generally require lower upfront capital and operational expenses, making them more accessible to a wider range of investors.
Diverse Tenant Base
Self-storage facilities cater to a broad spectrum of tenants, from residential customers to small businesses and even larger corporations. This diverse tenant base helps mitigate risk and provides stability in income streams. In the Sunbelt, where there is a mix of urban and suburban areas, self storage facilities are well-positioned to serve both residential and commercial customers.
Weathering Economic Downturns
Historically, self storage has proven its ability to weather economic downturns. During recessions, individuals and businesses often seek out affordable storage solutions while avoiding more significant financial commitments. As a result, self-storage facilities tend to maintain stable occupancy levels, providing a reliable source of income for investors.
With consistent demand, minimal economic sensitivity, and a diverse tenant base, self-storage facilities offer a stable foundation for investors seeking to navigate uncertain times. As the Sunbelt continues to attract a growing population, the self-storage industry is well-positioned to thrive in this dynamic market.
Our most recent self-storage deal in Newport News, VA is now closed as we are 100% committed!
Coastal took a $4MM equity position in the project with a 27% target IRR over a 2-4 year period. The minimum investment was $100K and the project has an expected start within the next 90 days (as of the beginning of November Y23).
Originally a 'Sears', this conversion is located along heavily trafficked roads, and at the center of major employers and economic drivers with interstate access and close to airports and shipyards.
Standby for more self-storage opportunities, among other asset classes.
If you are interested in learning more about where to begin, download our 'How to Get Started with Coastal' guide.
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