Self-storage remains an attractive investment opportunity that is well-positioned for long-term growth as demand is driven by favorable demographics across generations.

Housing Market Supports Self-Storage Demand

Interestingly, the self-storage sector is tied to the housing market more than many realize - not in terms of prices but transaction volumes. Housing transaction volume is poised to rise over the next two years as interest rates come down, income growth remains steady, and demand from the millennial generation continues. Demand will come from people continuing to buy homes as well as a large contingent of renters. Given high housing prices, many will be forced to rent, causing increased demand for storage given the lack of additional storage space available in rental units.

Demographics Provide Tailwinds for Self-Storage

Demographically speaking, the factors below are strong tailwinds based on current population trends.

Millennials are the largest population segment with the majority just now hitting first-time home buying age (mid to upper 30s), which is expected to increase household formation as inflation comes down. As millennials enter prime earning years, discretionary spending will likely rise, and with that so will the need for self-storage.

• Inflation – adjusted per capita consumption of goods has risen to over $16,000 for every man, woman, and child in the U.S. – a 54 percent increase since 20101

• 60 percent of all divorces occur between age 25 and 39

• The U.S. population is aging and contains a very large baby boomer population. We will see elevated housing changes due to downsizing and death from this cohort.

• Dislocation ultimately refers to people moving due to job losses, job changes, or other life changes. This aspect creates some recession resilience for self-storage as layoffs would increase dislocation.

Supply Impact on Self-Storage

The self-storage sector experienced a significant supply surge in prior years, but new supply is coming down quickly. A combination of high construction costs with weaker rent trends and elevated interest rates will result in a lower supply coming online in coming years.

Demand for self-storage remains robust, driven by demographic factors from the large millennial and baby boomer populations. New supply growth is projected to continue its downward trend and settle in around 1.5 percent. Recent storage rent declines have been a result of the unwinding of the massive gains seen from the unprecedented changes to housing and living patterns caused by pandemic-related regulations. Going forward, the supply and demand dynamics favor solid performance over time.

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This article was originally published by Inland. Please contact Inland with any questions.

1 U.S. Bureau of Economic Analysis, Real personal consumption expenditures per capita: Goods [AGDSRX0Q048SBEA], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/AGDSRX0Q048SBEA

2 https://www.wf-lawyers.com/divorce-statistics-and-facts/#:~:text=The%20average%20age%20for%20couples,individuals%20aged%2025%20to%2039.

3 Bureau of Labor Statistics. Accessed January 2025

4 Green Street Advisors. Self-Storage Sector Update. November 2024