Self-storage owners and investors are about to find out whether the industry is as recession-resistant as many have assumed over the years.

Jeffrey Adler, vice president at Yardi Matrix, made clear during a company spring-outlook webinar last week that the self-storage industry—along with the entire U.S. economy— is now in “unchartered” territory as a result of the coronavirus crisis that’s shut down huge swaths of the business world and forced millions of consumers to hunker down in their homes.

As a result, Adler said it’s hard to make predictions about the short-, medium- and long-term prospects for the self-storage sector, which is known for performing better than other industries during times of economic uncertainty and hardships.

But Adler told industry officials, and later repeated to the Storage Beat, that preliminary data “appears” to suggest that the conventional wisdom about self-storage is true: That it’s a “counter-cyclical sector” that tends to fare better than others during difficult times.

Early signs

According to Yardi’s internal internet listings service, the number of people searching online for self-storage information spiked by 22 percent nationwide during mid-March – with huge spikes seen in cities such as Boston (searches up 450 percent), Portland, Oregon (up 300 percent), and Indianapolis and Jacksonville, Florida (up 200 percent). SpareFoot saw similar activity spikes on its network.

The Boston data is revealing, since it suggests that a large number of students who were told to leave college campuses and return home last month were perhaps scrambling to find self-storage for their belongings. With its scores of large and small colleges, Greater Boston is considered one of the top college-town regions in the nation.

Since Yardi’s spring outlook webinar last week, Chris Nebenzahl, director of research at Yardi, said internet listing services have continued to see strong interest in self-storage services.

Another sign that self-storage is so far weathering the coronavirus storm is that share prices for self-storage REITs were down by 14 percent in late March, compared to February stock prices, while REIT share prices across all property classes were off by 26 percent, Adler said.

Reply hazy, try again

But Adler and other stressed that more data – and time – is needed to make assessments about where the self-storage sector is headed in coming weeks and months.

“I don’t want to make any definitive predictions until we see more,” he told the Storage Beat.

One key indicator that Adler said he’s monitoring closely is whether automatic rental payments by self-storage customers hold steady, decline or increase in coming weeks.

“April rent collection [data] is going to be important” to understanding what’s happening in the market, he said.

Another key indicator that Adler said he’s following is business bankruptcy filings. About 10 to 15 percent of self-storage renters are small-business owners leasing out space at facilities – and if business bankruptcy rates rise, it could hit self-storage hard, he said.

The hope is that the federal government’s recently passed $2 trillion economic-stimulus package – which includes hundreds of billions of dollars in loan funds for small businesses – helps to stabilize the economy and avert business insolvencies, Adler said.

Congress is already talking about passing yet another economic-relief package that would include even more funds for small-business loans, according to published reports.

A buying opportunity for some

As for self-storage facility sales, Jack Kern, director of institutional research and publications at Yardi, said the institutional market has effectively “frozen up” in recent weeks, as REITs and other large investors balk at buying up existing facilities around the country.

Large investors are “watching very closely” how the market plays out before resuming investment activity, Kern said during last week’s Yardi webinar.

But that hesitation could present an opening for smaller investment players, who, at least for the time being, won’t have to compete with large investors who have dominated the self-storage investment market in recent years, Adler said.

“I think this is an opportunity for some,” said Adler. “Smaller investors could step into the void” left by larger investors.

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Jay Fitzgerald