Rapid Growth
The number of U.S. storage locations has swollen from 27,500 in 1998 to 52,000, housing an estimated 25 million units, according to the Self-Storage Almanac, published by MiniCo Insurance Agency LLC, which provides insurance to the industry. They brought in an estimated $24 billion in revenue last year, according to the Alexandria, Virginia–based Self-Storage Association.
“People accumulate too much stuff,” says John Murphy, an analyst at Cohen & Steers Inc., a New York–based real estate investment firm that holds more than $52 billion of REITs and other securities, including a roughly 10 percent stake in Extra Space.
Other storage investors include university endowments, pension plans and a host of investment firms, including Morgan Stanley, Prudential Real Estate Investors and Chicago-based Harrison Street Real Estate Capital LLC. Blackstone Group LP bid on a 43-property storage portfolio offered by Harrison last year, according to people familiar with the transaction. It lost to Glendale, California–based Public Storage, the biggest self- storage firm, which won the assets for $315 million.
Carlyle Interested
Carlyle Group LP formed a partnership with William Warren Group of Santa Monica, California, in July to develop self- storage properties, according to a person familiar with the investment.
“Self-storage has come out of obscurity,” says Extra Space CEO Kirk, 53. “It’s no longer the goofy real estate class. It’s the real estate class that during the recession did better than any other.”
Storage returned 101 percent from the beginning of 2008 through 2011, outperforming all other REIT categories, according to data compiled by Bloomberg.
After a decade of expansion, Extra Space today operates 1,071 self-storage sites in 35 states, Washington and Puerto Rico. It owns about half of the properties outright and manages the rest as joint ventures or for other owners.
At least 11 million Americans pack their spare possessions into storage units every year. It’s all about life-changing events, Kirk says: “birth, death, marriage, divorce, upsizing, downsizing.”