Revenue in the U.S. self-storage industry will climb past $30 billion in 2018 and will approach $33 billion two years later, according to a new forecast from market research company IBISWorld.
IBISWorld predicts self-storage revenue will grow at an average annual rate of 2.9 percent through 2020.
“Over the next five years, the industry will continue to reap the benefits of an improving economy,” according to the forecast, obtained by The SpareFoot Storage Beat. “Demand for storage units is expected to pick up alongside consumer confidence and consumer spending.”
‘Bright future’
IBISWorld predicts self-storage revenue in the U.S. will reach:
- $28.2 billion in 2015 (up from $28.1 billion in 2014)
- $29 billion in 2016
- $29.5 billion in 2017
- $30.5 billion in 2018
- $31.5 billion in 2019
- $32.6 billion in 2020
IBISWorld says the U.S. self-storage industry “faces a bright future.”
Ground recently was broken for Delaware Beach Storage Center.
“Steady population growth, increases in the residential rental market, rising per capita disposable income and the number of relocations will all continue to support growing industry demand over the next five years,” the forecast says.
However, IBISWorld expects rental rates and profit margins to dip slightly as the industry absorbs more new facilities, leading to heightened competition and subdued revenue growth. IBISWorld says that means operators will be forced to step up promotions and discounts to attract and keep customers.
More facilities on tap
Here is IBISWorld’s outlook for the number of self-storage facilities it expects to be operating in the U.S.:
- 52,952 in 2015 (up from 51,995 in 2014)
- 54,419 in 2016
- 54,998 in 2017
- 56,721 in 2018
- 58,511 in 2019
- 60,152 in 2020
Based on IBISWorld’s projection, the number of U.S. self-storage facilities will grow 14 percent from 2015 to 2020. That growth rate is higher than most self-storage experts have forecast.
Self-storage construction, such as this Get Space project in Oregon, is happening across the U.S.
Connie Neville, managing director and co-chair of the self-storage business at Sperry Van Ness, said the strong performance of the self-storage sector will continue to entice developers to build ground-up projects or convert existing buildings in urban infill locations.
Given the relative lack of new development in the self-storage industry since 2009, “supply and demand are essentially now at equilibrium,” Neville told The SpareFoot Storage Beat. That accounts, in part, for current occupancy rates above 90 percent for large and smaller operators across the country, she said.
Acquisitions poised to ramp up
Looking down the road, IBISWorld expects merger-and-acquisition activity in the self-storage industry to ramp up, with large and midsize operators gobbling up facilities run by smaller operators. About $3 billion worth of self-storage acquisitions occurred last year in the U.S.
“This trend will remain a key strategy for many industry participants that wish to expand their geographic range, reap the benefits of horizontal integration and remain competitive in the next five years,” IBISWorld says.
Neville said the industry’s strong fundamentals, along with an abundance of private and institutional equity chasing self-storage deals, have prompted “aggressive pricing” for storage facilities.
“Seasoned operators are competing for older, well-located properties in secondary markets, pushing prices higher and cap rates lower,” she said. “This will continue to be the case until the historically low interest rates rise, the global economy falters or the political and regulatory climate becomes unfavorable.”
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