The 'Recession-Resistant' Investment: Self-Storage

With the onset of a recession it is increasingly important to invest in ‘recession-resistant’ asset classes. While sometimes incorrectly referred to as ‘recession-proof,’ self-storage is more recession resistant than most asset classes. Historically, self-storage values have continued to increase the past few decades - sometimes even during a recession - despite several economic downturns.

Self-storage was one of the best performing asset classes during the Great Recession. According to the Trepp CMBS Report, self-storage has, again, been one of the best performing asset classes since the COVID-19 pandemic.

As the Trepp CMBS report indicates: “typically speaking, the reason why an individual would rent a storage unit is driven by four primary life events – the 4D’s of self-storage – Divorce, Dislocation, Death, and Downsizing.” During a recession, these 4D’s are, unfortunately, more prevalent. When there is an uptick in divorce, as there has been in recent years and is common during a recession, one household becomes two, and people organically need self-storage, whether for a temporary term or the longer term. When households are downsizing, or dislocation occurs, people need space to store their belongings. When there is death, which statistics show increase during a recession, oftentimes families look to store a deceased loved one’s belongings.

As the recession unfolds, people will be looking for yield and ‘safe’ assets to invest. Most other asset classes – like smaller residential properties, for example – simply cannot match the margin of safety afforded by self-storage during recessionary times.

Self-storage is primed to continue to grow in the coming years. Approximately 80% of the self-storage facilities throughout the nation are owned by non-REIT operators, providing investors like us opportunities to purchase cash-flowing assets and stabilize operations to increase value.

Even during a recession, a self-storage facility should produce monthly cash flow. This cash flow is generally a hedge against a recession, and inflation, because as more money is printed, rental rates increase. While many other investments, like stocks for example, fluctuate in value, they do not produce monthly tangible cash to put in your pockets, all the while locked in with long term fixed rate bank financing.

These are just a few of the top reasons to invest in self-storage, even during a recession. Feel free to chime in with additional benefits!