The following Q&A was completed as part of our conversational Commercial Real Estate FAQ Interview Series, we hope you find it helpful.
The Covid-19 pandemic has shown just how stable and reliable the self storage market truly is. While office buildings are shuttering, retail stores are going out of business, and multi-family is struggling to make rent, all of the “stuff” that needs a place to go finds its way to self storage spaces. As the world changes, the need to have reliable storage does not.
Richard Wilson: How stable and reliable is self-storage when you compare it to multi-family? What are the trade-offs?
John Manes: Well, I mean now is the perfect test and the perfect time, right? With the pandemic and everything like that and the only thing I can say is, you know, back in January before everything started happening, I, internally we were talking about, I kept bringing up over and over again we need some type of correction. I mean, there’s so much money being thrown at everything and people with no storage background are just building storage anywhere, and they’re building these 120-150,000 square foot properties and they don’t know how to run them so they don’t know revenue management, or marketing, or anything like that – that was making me way more nervous back in January than when the pandemic hit and all of that relates to the question you just asked and that is – the pandemic hit in what I’ll call early March, we had our best March ever, we had our best April ever, we had our best May, June, July, August, we’re having a great November. I mean, when you add all that together, in the realm of storage versus multi-family, when all this happens I heard and saw a thing today that another 762,000 people applied for unemployment today, I mean when they can’t pay their rent, like in multi-family, or when they can’t pay their mortgage like in single-family, what do they do with their stuff? They put it in storage, right?
And here you are, and it’s a perfect example of what can happen in a major catastrophe type of environment, like a pandemic, that storage outdoes everybody. I mean, look what’s happening in retail, right? I’m driving by and seeing “Now renting” signs and vacant on brand new stuff, and two year old, three year old stuff, because all these retailers are going out of business. Your small office buildings, everybody is working from home, so you’re starting to move out of those. Your large office buildings, everybody is working from home. And what do they do with all that office furniture? They put it in storage!
John: It’s just, I mean, from a common sense type of application is when they get rid of everything else, they always keep the stuff, and the stuff goes in storage.
Richard: Right, right, yeah. Good point. I have heard positive things from everybody in self storage, and that’s a good point – even if the multi-family space got hurt worse than it is now, that it might still help storage slightly or even out storage. You know, a couple percent more bad accounts, but double the new clients coming in, who knows, right? So, it sounds like you guys are doing quite well through the pandemic, right?
Richard: Yeah, great.