Storage Benefits from 2020 Disruption--What Now?


The pandemic of 2020 has been a “black swan event” that could not have been predicted by the vast majority of us and it changed the trajectory of commercial real estate investing.


Self storage was a beneficiary of the disruption caused by the global pandemic—as its 30 year history has shown, storage has fared well in good times and in bad. During 2020, we have seen many pandemic-related use cases:

  • Students came home from college and needed to clear out their dorms and apartments.

  • As the shutdowns set in, bedrooms became home offices and families cleaned out any storage spaces in their homes to accommodate 'work-from-home'.

  • Many restaurants closed and stored expensive kitchen equipment.  Those that remained open often had limited seating requirements which led them to storing unused tables and chairs.

  • Office space has been reimagined.  Many realized that an expensive office could be replaced by an inexpensive and often, more convenient and secure, self storage unit.

  • With more time spent at home than maybe ever before, people have decided to renovate kitchens and other areas at their homes creating additional need for storage.

  1. The personal and family dynamics arising from Covid-lifestyles introduced self storage to customers that had never considered it before.  We will see this demographic have a first experience with the product.  According to a REIT, 50% of new renters have never used storage.

  2. As we observe positive performance metrics in the storage industry, we will see increased interest in storage investment, particularly as a stabilized, cash-flowing asset. This will put our first fund in a good position to benefit from increased sophistication being brought to the asset class.  As bigger buyers get into the space, our stabilized portfolio will be even more attractive in coming years.

  3. Most of the hardest hit asset types will start recovering.  Between vaccinations and herd immunity, asset classes like student housing, hospitality and senior living will begin to recover in later half of 2021.   However, valuations could be impacted for many years after a normalization of occupancies.

  4. The US population shifted into uber consumer mode for 2021; spending has increased by 9% in 2020.  From March to November of 2020, the US spent $575 billion less on services (fewer trips to Miami) compared to the same time period in 2019, but spending on durable goods was up $60 billion (think home gym equipment).  This will continue to drive strong storage demand in 2021.

  5. Home prices have continued to rise during the pandemic.  Single family homes were the weakest asset type during the last recession, but will continue to be the strongest in this next recovery and Millennial demand for homes is coming of age.  Unfortunately for lower to middle income buyers, land for homebuilding is not readily available at affordable prices, contributing to increased prices and causing buyers to simply buy a smaller home.

  6. In a period of uncertainty, development activity decreases. Radius+ has begun to project this decrease.  For our first fund, this bull approach in a down time puts our assets in a favorable position upon completion and stabilization.

We are all hopeful that 2021 will be normalizing, but after sustained changes in behavior, there will be accelerated trends that continue and ‘new normals’ in some areas.


Join the conversation; tell us what you think 2021 will bring.

Photo by Jose Antonio Gallego Vázquez on Unsplash