One constant has remained over the last fifteen years, the growth of self-storage facilities. During the first twenty years of my life, I never saw them. Now they follow me around like a serial killer in a film. After moving into my house, an old K-Mart turned into a JustStorage facility. The parking lot still has retained its size when it was a K-Mart despite never seeing anyone going in and out of this facility. What could have been used for housing, small businesses, and other endless possibilities is instead used for storing stuff and endless parking spots for no one to use.
My other experience with storage facilities is my brief flirtation with Storage Wars during my college years. Over time, I noticed the same facilities started popping up or the names changed to the names of other facilities around the metro. While no extreme consolidation has taken place like in agriculture, it is happening.
At the beginning of the year, more than 37% of self-storage space was controlled by the top five firms, Extra Space Storage, Public Storage, CubeSmart, National Storage Affiliates Trust, and U-Haul. While U-Haul is a publicly traded holding company, the other four are real estate investment trusts according to SpareFoot.
According to the government, a real estate investment trust (REIT) allows individuals to invest in large-scale, income-producing real estate. These may include office buildings, shopping malls, apartments, hotels, resorts, self-storage facilities, warehouses, and mortgages or loans. Unlike other real estate companies, a REIT does not develop real estate properties to resell them. Instead, a REIT buys and develops properties primarily to operate them as part of its own investment portfolio.
Anyone can invest in these companies which control a considerable amount of square footage space across the United States. According to SpareFoot, the United States self-storage industry contains more than 2.1 billion square feet of total self-storage. Within the last five years 292.9 million sq. ft. has been added. For reference, the football field, Iowa State Cyclones and Iowa Hawkeyes will meet on in September is 57,600 sq ft. 36,458 football fields could be placed within the total self-storage footprint. 5,085 football fields worth of self-storage space have been built in the last five years.
Despite plentiful amount of self-storage, competition has not been as plentiful. Since 2012, the industry has been acquiring, not competing according to Inside Self-Storage.
“Its faster to acquire than to build new properties,” notes Marc Boorstein, a principal of MJ Partners Real Estate Services, a real estate brokerage and investment-banking company in Chicago. “The long lead time to get new developments permitted, built and then leased up to stabilization has partially caused development for REITs to virtually cease. Additionally, the difficulty in obtaining construction financing for large-scale programs of new development has limited new construction.”
This year, the “Big Five” is now consolidating down to four companies after Public Storage announced its acquisition of National Storage Affiliates. According to The MergerSight Group, what used to be the Big Five, controlled only 15% of the total U.S. market a decade ago has jump to almost 40% in this decade. This deal would also increase Public Storage’s REIT-management market share from 35% to 44% according to CRE Daily.
This came after a merger of Extra Space Storage and Life Storage in 2023 which made Extra Space Storage the largest self-storage facility company in the industry, overtaking Public Storage. This new deal for Public Storage meant they did not want to be outdone. After this $10.5 billion deal goes through, they will now be the largest self-storage facility.
The heat of this consolidation has been there for a few years as noted by the Inside Self-Storage in 2021.
“With the closing of this $1.69 billion transaction, Kieran O’Shea has advised on three of the largest self-storage transactions this year, all in excess of $1.5 billion. He represented the sellers of ezStorage ($1.8 billion), which sold to Public Storage Inc. in April, and is advising Manhattan Mini Storage, which is expected to sell to StorageMart this month for as much as $3 billion. The Manhattan Mini transaction will be the largest property sale in New York City since 2015, the release stated.
“It’s crazy, it really is, how big and highly fought-after these deals have gotten,” O’Shea told the SpareFoot Storage Beat, an industry blog. “These deals in 2021 will be the largest deals in the sector in the last 15 to 20 years.”
As this was all happening, Public Storage was making an acquisition. Public Storage also bought up Simply Self Storage in 2023 for $2.2 billion. According to CRE Daily, institutional players are likely to continue to consolidate due to capital inflows and a push for scale and operation efficiency by leveraging analytics and tech to squeeze more value from existing portfolios.
If you do not have a lot of stuff or do not plan to come into possession of a lot of stuff, you can avoid this industry. Unfortunately, one in three American use self-storage according to SpareFoot. As the consolidation continues and the larger self-storage facilities gain more market share, it will be easier for them to use their market power to benefit their bottom line at the expense of their customers like other industries.
While I am no fan of these self-storage facilities popping up everywhere I go, it will be even worse if they continue to consolidate. Competitive markets are good, no matter what the market is.
America’s throw away, disposable, planned obsolescence society has suddenly turned into a hoarding, store and save one? Even with a television show watching people bid on, then open it up for the cameras, like Geraldo did with Capone’s secret vault? Sorry, Brooklyn Bridge buyers, I don’t believe so. These REIT people aren’t investing in storage units. They’re buying space. The land underneath them that, with the exception of the minuscule amount being created of lava flows, is the what’s behind the curtain with this scam. As you point out, these aren’t the best uses for these precious acres. Just like public lands were never meant to be used for data farms.