The Self-Storage industry generates approximately $39 billion annually and there are an estimated 60,000 facilities in the U.S. Recent financial reporting from the largest publicly traded owners and the industry overall indicate they are being impacted by the shut-down of the economy. Vacant units are increasing and rental prices are declining. These are signs that the industry will suffer as the economic downturn extends throughout the summer months. The busiest time of year for storage units is between Memorial Day and Labor Day each year when people are moving and have a need to store their items.
In some markets it is being reported that lease rates for self-storage rentals are down 45-50%. This is a result of over supply from increasing development and the increasing vacancy. In 2018 the industry saw a record 67 million square feet of storage space delivered. In California available units have increased by 75% year-over-year and rents have declined 16%.
Public Storage, the largest self-storage company, had 20,600 available units last year at this time; the number of available units now is 47,100. In addition, the average price for units has dropped from $127 to $96. According to the CFO of Public Storage customer demand has been severely weakened, down 17% year-over-year during the month of April. In an effort to boost volume the company has discounted rates on average 20%.
In Pasadena, CA the City Council recently voted to amend the city’s eviction moratorium to include protections for self-storage tenants. It prohibits landlords from evicting tenants for non-payment of rent due to financial impact from COVID-19. Currently tenants are required to repay any back due rent within six months of the expiration of the emergency period. Provisions were also added to ban charging interest or late fees on unpaid rent and to encourage landlords to establish payment plans or allow partial rent payments. The moratorium will remain in place until the declared state of emergency has been lifted.
The government response to the COVID-19 pandemic in shutting down the economy is having a sudden negative impact on all asset classes of commercial real estate. The longer this persist the further the erosion of property values.