What is a recession and why are self-storage facilities considered recession-resistant?
We live in an uncertain world and uncertainty breeds fear. Fear of the future can lead to all sorts of different behaviors in people. One common behavior that manifests during periods of an economic downturn is the desire to “hunker down” and save. This often includes downsizing to a smaller home, apartment, or even storage unit.
What is a recession?
A recession is defined as a significant decline in economic activity lasting more than a few months. It is typically characterized by a decrease in the gross domestic product (GDP), higher unemployment, and lower consumer spending. As a result of these factors, people tend to downsize and become more frugal with their spending in order to save money.
Whether the economy is experiencing growth or a recession, there is always a constant demand for self-storage space. People's lives and businesses are constantly in flux, which creates a need for flexible storage solutions. It is this flexibility that has made self-storage one of the most recession-resistant industries.
Many self-storage operators also offer flexible payment options, which can be appealing to cash-strapped consumers looking to save money. This makes self-storage an attractive and affordable option for those looking to downsize or declutter their homes during a recession.
Self-storage facilities are often seen as recession-resistant investments because they provide a necessary service that is not impacted by economic downturns. People still need to move, downsize, or declutter their homes during a recession. In fact, some people may even be more likely to rent storage space during a recessionary period as they look to cut costs and save money.
This makes self-storage units an attractive investment option for those looking for stability and consistent cash flow. The demand for storage space is relatively constant, regardless of the state of the economy. And while occupancy rates may fluctuate during a recession, they typically rebound quickly once the economy starts to improve.
Naturally, there will be some impact on the self-storage industry during a recession. Occupancy rates may decline slightly as people move less and have less need for storage space. However, self-storage is typically less affected by economic recessions than other types of real estate investments. In fact, the industry did see a decline in occupancy and rental rates during the Great Recession of 2008-2009. However, self-storage was one of the first sectors to recover and has since outperformed the overall commercial real estate market.
The Bottom Line
The self-storage industry is expected to continue to grow in the coming years, providing investors with a stable and profitable investment option. It is considered to be one of the most recession-resistant industries, with a history of outperforming the overall commercial real estate market during economic downturns.
Self-storage provides a necessary service that is not impacted by economic downturns. It provides a flexible, affordable solution for those looking to declutter their homes or downsize their businesses. So, if you're looking for a stable investment with the potential for consistent cash flow and high returns, self-storage may be a good option for you.
* If you enjoyed this article about What is a recession and why are self-storage facilities considered recession-resistant?, you might also enjoy reading Diversifying Your Portfolio: Why Self-Storage Investments Are Worth Considering and Decoding Profitability: Understanding Internal Rate of Return (IRR) in Self-Storage Investments.
