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January 3, 2023
The self storage industry gained a lot of attention from “succeeding” in the Great Recession when a lot of other real estate industries struggled.
Some people even said self storage thrived during that extended economic downturn.
But is that true? And if it is, does that mean we’re going to thrive a second time?
“Thriving” during a recession doesn’t necessarily mean we had a boom and everyone made a lot of money. There were plenty of self storage operations that went under during the slowdown.
And those that did well didn’t always do well relative to prior years, just better than other industries,
The good news is that yes, self storage is expected to do well in a coming recession.
That doesn’t mean every self storage business is going to do well. Here we’ll lay out some reasons self storage might do well - and how you can help your business to be one of the success stories!
Before we start plotting our recession strategy, it’s important to understand why self storage might be different from the real estate investments that struggle.
One of the reasons self storage did well in the Great Recession was the 4 Ds - Death, Divorce, Downsizing, and Displacement. The latter two especially aided the industry. As the housing market collapsed, people were forced to downsize or move with greatly increased frequency.
This drove up demand for self storage units, as portable assets like furniture were still valuable even if there wasn’t room in the house for them.
Self storage becomes more valuable when life is turbulent - children moving back in with parents, families consolidating into smaller homes, people moving for new jobs, etc. Anything that upsets the rest of the country tends to drive demand for storage.
But not all demand is equal. Self storage was simpler during the Great Recession - lots of metal boxes with locks on them. Today, the industry has matured into a tech-savvy, amenity-filled, premium-demanding business, which has been a major driver of growth.
Premium self storage units may not do as well during times of economic difficulty. If your tenants are struggling to pay their mortgage, they may not have the money to afford a smart storage unit.
There are also two big reasons a new recession won’t be exactly the same as the Great Recession:
While no one knows for certain whether we’ve headed into a recession or not, there are some steps you can take that will benefit your business no matter what.
Check out our "Preparing for a Recession" blog for a more in-depth look at how you can improve!
Our advice all circles around one idea - make your business as efficient as possible. That means upgrading your self storage software, cutting any expenditures that aren’t contributing to your customer experience, and making it as easy as possible for people to rent with you.
Ensure you have enough cash on hand for a few months of expenditures if possible.
Creating a great customer experience is the best way to help your business succeed, regardless of whether or not we hit a recession.
Happy customers are more likely to stay with you (even if you can’t offer the lowest rates or best features). They’re more likely to refer you to a friend or family member, even if the initial customer doesn’t need storage anymore.
A remarkable customer experience is critical to the sustained growth of any business. A positive customer experience promotes loyalty, helps you retain customers, and encourages brand advocacy. - HubSpot
Customers are your best source of self storage marketing. Potential tenants care far more about what their family and friends think about your business than what your marketing copy says.
This means both word-of-mouth and online reviews. If your Google Business Profile isn’t set up right, or if it holds lots of negative reviews, you should be worried heading into a potential downturn.
Then, be sure that you’re earning good reviews by offering the best rental experience possible.
Great customer service is definitely a part of that, but it’s not the only part. Are you easy to find (ie, on the front page of local searches)? Do you offer online rentals? Can customers rent, store, and pay easily?
If you’re leading the way in your area on these fronts, you’ll be better able to weather whatever storm comes your way.
Check out the previous entries in our Recession series: