Self Storage Industry

Demand Drivers

Self storage offers potential diversification benefits to real estate portfolios. The six key demand drivers of self storage are: population growth, percentage of renter-occupied housing units, average household size, average household income, supply constraints and economic growth.

While investors should know the current composition of demand, understanding the trend in demand composition is vital. Self storage tenants fall into four main categories: residential, commercial, student and military.

	Residential 75% of the tenancy - Residential will remain the biggest demand group, and it will always be crucial to self storage success. The average lease term for residential self storage is 13.4 months.
	Commercial 19% of the tenancy - Commercial has grown in recent years and is likely to form a greater percentage of total tenancy as more small and medium sized businesses rely on self storage. The average lease term for commercial self storage is 25.2 months.
	Student 3% of the tenancy - Student segment remains small but very stable. This is a very valuable segment to the industry because it introduces the next generation to the usefulness of self storage. The average lease term for student self storage is 4.6 months.
	Military 3% of the tenancy - Military segment remains a small percentage, however is important because its average lease length is a longer term. With more U.S. troops now overseas, demand has heightened. The average lease term for military self storage is 12.7 months.

Source: 2008 Self Storage Almanac

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