In a world of real estate investment, self-storage has emerged as a profitable asset class. The demand for self-storage space continues to rise beyond the original three Ds of death, divorce, and disaster. There are many other factors, such as urbanization, downsizing trends and the e-commerce boom.
When considering self-storage investments, geography can be a major variable. For the Florida commercial real estate investor, the question arises: are there compelling opportunities in the other 49 states or should I concentrate here?
Florida’s allure for self-storage investments
Renowned for its vibrant lifestyle and warm climate, Florida has emerged as a hotbed for real estate investors of all kinds. The state’s self-storage market benefits from several key factors.
The first of these is population growth: Florida’s consistently growing population contributes to the demand for storage units. Related to that consideration is the booming tourism industry and seasonal residents. With its many popular destinations and the snowbirds who stay here seasonally, Florida experiences fluctuations in demand, allowing for potential price optimization.
Climate is another driving force in the industry. Florida’s humid subtropical climate makes climate-controlled storage units highly coveted, usually commanding higher rental rates.
The economy and regulatory environment of Florida also help this industry perform. The state’s diverse economy, which includes tourism and hospitality, technology and finance, offers a stable foundation for self-storage demand. Furthermore, Florida’s business-friendly regulations can facilitate the process of acquiring, developing or managing self-storage properties.
Self-storage investments beyond Florida
While Florida presents compelling reasons for self-storage investments, opportunities exist throughout the entire United States. The other states, of course, experience a wide range of economic growth rates, impacting demand for storage units. Research into local job markets, housing trends and population growth is crucial to determine areas where such investments are desirable.
Outside Florida, climate considerations can be both an advantage and disadvantage. While climate-controlled units might be crucial in some states, others might not recognize the same demand due to milder temperatures.
Regulatory environments can also vary significantly from state to state, making it essential to understand local regulations, zoning laws and permitting processes before investing. Analyzing the supply-and-demand balance in a specific state’s self-storage market is another critical factor when contemplating an investment in self-storage real estate. Oversupply can lead to stagnant occupancy rates and/or rental income.
Making an informed decision
Consider these steps:
- Market Research: Understand the supply and demand dynamics in both Florida and other potential states. Analyze population trends, economic growth, and local factors affecting self-storage demand.
- Financial Analysis: Conduct comprehensive financial projections for potential investments. That means factoring in acquisition costs, operational expenses, rental rates, and potential returns.
- Location Matters: Give careful consideration to geography. In any state, location remains an important factor. A well-located property in a less popular state might yield better results than a poorly located property in Florida.
- Partner with Experts: Engage with local real estate professionals such as advisors at SVN Commercial Advisory Group, who keep up with the market’s ups and downs and provide valuable insights.
Associate Advisor Mary O’Malley, CCIM specializes in self-storage investments at the Sarasota-based firm. She is a member of the SVN national self-storage team along with Nick Malagisi, SIOR, National Director of Self Storage. If you’re contemplating buying or selling, contact Mary at (941)-960-6342 or email@example.com for more information about this important asset class.