Soaring Housing Costs Create Self Storage Surge
August 8, 2023 4 Minute Read
New condos are under construction seemingly everywhere you look, as soaring housing costs and limited inventory force people to consider smaller and more affordable housing options. With less space for belongings and growing families, many are having to turn to self storage for relief.
Clive Bradley, leader of CBRE Canada’s Self Storage Practice Group, says the current downsizing movement has generated a lot of business for the self storage industry.
Demand for storage is strongest in Canada’s big cities, and real estate investors are also turning their attention to self storage, seeing it as an attractive alternative to traditional asset classes such as industrial, retail and office.
"People need storage in good and bad times, so conditions are likely to remain positive for self storage for years to come," says Bradley. “And it’s a very appealing market for investors; investment returns are good, growth opportunities are abundant, and the investments are widely considered to be recession-resistant.”
But generally speaking, the Canadian self storage market is undersupplied.
In the U.S., where the industry is in the mature phase of its business life cycle, it is generally believed that there are on average five to eight square feet of storage space per capita.
The Canadian self storage market, which is still in a growth phase of its business life cycle, is estimated to have an average national supply of two to three square feet per person. In the Greater Toronto Area, demand for self storage is estimated to be at approximately four square feet per capita, according to Bradley.
Big Players Consolidate
In the past, storage facilities in Canada were primarily run by mom-and-pop owners. But Bradley says there’s been a growing trend of market consolidation by bigger players.
“Generally, there are three traditional ways for storage companies to grow or enter the market: buy an existing storage facility, build a new facility or convert an existing commercial building to self storage,” Bradley explains. “High real estate prices in the major Canadian cities are driving both new and existing operators into smaller markets, where prices are more reasonable and competition is less.”
Many mid- to large-sized self storage operators are acquiring self storage facilities in small towns as another way for to grow and gain market share.
During the pandemic, Canada saw a spike in demand for self storage facilities. But Bradley says restrictive zoning and planning by-laws and regulations are making it more challenging for owners in some communities to obtain permits and approvals to proceed with their development plans. For example, it has been particularly difficult for self storage projects including shipping containers and portables – a low-cost alternative to traditional self storage buildings – to obtain approvals.
Instead, in markets where office and retail vacancy rates are high, entrepreneurial owners are finding new ways to repurpose existing buildings or integrate storage into new projects. In Toronto, one owner converted an obsolete office building into a storage facility.
“We’ll likely see more creative repurposing of vacant commercial buildings, in whole or in part, into storage, where demand permits,” says Bradley. “However, self storage conversion is by no means a guaranteed solution to turning-around problem real estate.”
Accessible Self Storage
The self storage industry has had to address fire and safety concerns in its facilities, particularly for women, who are one of the largest user groups of storage facilities. Today, common measures include internal and external security cameras, well-lit hallways, emergency intercom systems and sprinkler systems – making self storage safer and more accessible.
Some companies offer a pickup model for an additional fee, making it easier for disabled, elderly and vehicle-free users to put belongings into storage.
And new tools are facilitating the storage process around the clock. At fully automated storage sites, users can access their units by inputting a code sent to their phone or computer. New technologies are also reducing the need for onsite staff by helping operators run facilities remotely, optimizing unit pricing based on occupancy rates, and thwarting users with overdue rent or those banned from the premises.
Temperature monitoring technology is also becoming more common. And Bradley expects demand for climate-controlled units will grow as temperatures continue to reach new heights.
“It’s an evolving industry,” says Bradley. “There are always new ideas. Some catch, some don’t. It will be interesting to see how the self storage industry adapts to better service Canadians in the future.”
One thing is clear, self storage is going from niche to the norm. For average users or investors, this is a property type to watch as self storage steps out of the closet and into the limelight.
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