The Outlook for Self Storage is Optimistic During the Global Health Crisis
The coronavirus outbreak has mobilized the country into a collective mode of crisis management. Social distancing is the new buzzword. People are on their guard to keep a distance of six feet between themselves and other humans. Grocery stores have taped the floor in six foot increments so that shoppers maintain safe distance while waiting in line. Washing hands for 20 seconds, and refraining from face touching are strongly suggested to have a big impact on slowing the spread of the virus. Preserving the health and welfare of people is the priority, but the economic fallout from this pandemic is something we all have to consider.
To protect the well-being of customers and employees, many businesses have had to make difficult decisions that will severely impact their economic health. When possible, people are working from home, but schools are shut down and colleges are ending the spring semester early. Restaurants and non-essential businesses are closing, and people are losing their jobs and their income. Our way of life hasn’t seen this kind of upheaval since WWII.
We’re all concerned that the economic byproduct of this virus is going to topple us into recession. Despite this mess, the self-storage industry is in a favorable position.
Positive News for the Self-Storage Industry
Dave Knobler, First Vice President of Marcus & Millichap, shared some positive self-storage industry news. Most of the industry people that he’s talked to report that operations are stable, if not a little bit up. Of course, everyone is bracing for what collections might look like in early April when late fees take effect. It’s unlikely that many operators will get punitive, but will presumably take a “wait and see” stance.
In a Special Report on Global Health Crisis FAQs, John Chang, Senior Vice President and National Director of Research Services Division shared some positive news.
“Self-storage demand should remain stable, though absorption could flatten over the short term as more people shelter in place. However, if there is significant movement in the apartment market as a byproduct of the new coronavirus, it’s possible self storage will fill a role as people consolidate households.”
Keeping in mind that during this time of economic stress we’re seeing daily change, Spenser Allaway, Lead Self Storage Analyst at Green Street Advisors Inc., is cautiously optimistic. He suggests that most REITs expect the negative impact (such as declining revenue) to moderate through the year, potentially even flattening out by year’s end.
The following chart indicates that self storage is taking less of a hit than most other commercial real estate asset classes.
The coronavirus outbreak is a reminder to all of us that we need a plan in place to bring us through catastrophic events. This pandemic is different than ordinary natural disasters, and we have to be resourceful and tenacious to get to the other side of this mess. This is not a time to panic, but a time to follow health guidelines and take simple steps to prepare for the future