As any industry matures it is natural to see consolidation. Whether it’s the early days of the auto industry, steel, oil, banking, you name it, and maturing industries go through a process of consolidating. So, where is the self-storage industry?
Although personal storage as an industry was purportedly started in the US by Bekins (Bekins Van & Storage Co.) in the 1850s, the advent of “individual storage units” started around 1964 in Texas. Public Storage was started in 1972 and an industry was born.
Today there are somewhere between 52,000 – 55,000 storage facilities in the US. – depending on the data source and definition of what constitutes a self-storage facility – an increase of 9,000 facilities over the past decade. In 2014 the 5 largest self-storage REITs owned 5,633 facilities and provided 3rd party property management (3PM) on an additional 465, for a total market share of 14%. Today that market share is 23%, an increase of just over 50%. Diving deeper into that number shows that their share of property ownership has increased steadily from 13% to 16%, but that their share of 3PM has increased much more rapidly, from 1.1% to 6.5%.
Extra Space Storage (NYSE: EXR) has been the most aggressive player in the 3PM space, growing their properties under management from 341 to 1,908 over the past decade, an almost six-fold increase. Total stores under REIT management increased from 465 to 3,421 stores – an increase of over 735%!
Public Storage (NYSE: PSA) is a newcomer to the management business growing to 235 stores under management over the past few years, while CubeSmart (NYSE: CUBE) and U-Haul (NYSE: UHAL) have also grown their presence.
While the consolidation in the self-storage industry among the REITs is real, less than twenty percent of the overall property count is owned by the public REITs while just over twenty percent fly their flag. Probably the biggest change is the increase of privately held companies that are both regional and national players that own or operate another 13% of the overall market – such as StorageMart, Prime Storage, StorQuest, SmartStop and others that all own or operate 100+ stores. In 2014 there were 10 operators with 100+ stores, today there are over 30.
Given the importance of having a digital presence, the cost to appear at the top of a google search, coupled with the investment in technology to operate a modern self-storage facility and the challenge to own an independent, single-store operation can be challenging. Does this portend continued consolidation among national players? Are the days of the “mom and pop” operation numbered? Certainly, consolidation will continue and may even accelerate a bit, but there are still many opportunities for individual players in the self-storage business!
About the Author:
Tom de Jong, MBA, SIOR is a founding member of the Colliers National Self Storage Group, founder of the de Jong I Becher Self-Storage Team at Colliers, one of the top national self-storage brokerage teams and has been a commercial real estate broker since 2007.
