When you picture a self-storage facility, you likely envision the traditional kind of facility we’re all familiar with: long hallways lined with storage units in a sprawling complex that requires some serious real estate.
You probably don’t picture a brightly-lit, 10,000-square-foot warehouse space in San Francisco’s downtown market district, surrounded by high-rise buildings and with a coworking space operating above it. But in 2020, self-storage is beginning to look different from what we’re used to.
This year, Neighbor made its first commercial expansion into San Francisco, listing that 10,000-square-foot storage space, located at 995 Market Street in Mid Market, on our peer-to-peer storage rental platform. The space is located on the first floor of a building operated by WeWork, making it the kind of mixed-use storage facility that’s becoming increasingly common in dense metro areas. And in the coming months, Neighbor plans to add more of these types of repurposed, rentable spaces to its platform.
San Francisco is one of the most densely populated areas in the United States. According to the Census Bureau, San Francisco is home to 17,246.4 people per square mile.
Having that many people means there’s a real need in the San Francisco area for self-storage — but the density of the population begs the question: Where do you put it?
But this year, San Francisco’s office vacancy rates nearly doubled, from 3.7 percent at the end of 2019, to 6.6 percent in the second quarter of 2020. San Francisco isn’t alone in that either — with the coronavirus pandemic causing many companies to shift to long-term remote work, office vacancies in cities all over the U.S. are expected to reach historic highs. Considering this trend, it’s no surprise that storage facilities like the one at 995 Market Street are becoming more common. Residents need storage. And commercial landlords and building owners need to fill newly vacant space.
And so, in 2020, self-storage is changing. Far from the sprawling, side-of-the-highway facilities most of us are familiar with, a new kind of self-storage is becoming more common: urban, mixed-use space that meets the needs of a new generation. And emerging technology, like Neighbor’s platform, is facilitating that shift.
Here’s how and why self-storage is changing, and how Neighbor is meeting the needs of a new kind of self-storage customer.
Self Storage Demand Goes Where the People Are
To understand and predict new trends in consumers’ need for self-storage, you have to understand some of the industry’s history.
For example, the fact that self-storage occupancy has been holding steady at over 90 percent since 2015 tells us that there’s a consistent need for storage space that’s keeping up with the industry’s growth.
Speaking of the industry’s growth, it currently totals about 60 million square feet of new construction each year. Self-storage is a $40-billion-per-year industry that represents the fastest-growing segment in commercial real estate — and has for four decades running. While many industries have contracted during the pandemic, self-storage has seen continued growth from people who want more personal living space in their homes, or who are relocating for new jobs or downsizing to reduce their living expenses.
According to the Self Storage Association, one of the most important factors to consider when predicting self-storage demand in any given area is its population growth. For example, take Raleigh, North Carolina, the metro area that experienced the third-highest population growth in the U.S. from 2010 to 2016. Raleigh also ranks extremely high among cities with the most new self-storage space coming online year-over-year.
On the other hand, consider Chicago, which has shown the largest population decline of any major metropolitan area in the U.S. in recent years. Subsequently, the Chicago area’s self-storage demand is softening, and the industry there is showing lower square footage growth and square foot per capita growth than the national average.
In other words, self-storage demand is highest in places where population numbers are not only high, but trending upwards. That means that self-storage is needed in metropolitan areas where the population is growing. According to the Census Bureau, the top five fastest-growing metro areas in the U.S. from 2010 to 2019 are:
- Dallas, Texas
- Houston, Texas
- Phoenix, Arizona
- Atlanta, Georgia
- Washington, D.C.
All of those cities also appear in the Census Bureau’s top 10 list of most populous metropolitan areas. That means the cities with the highest rates of growth (and presumably the largest demand for more self-storage) are already some of the nation’s biggest and most densely populated.
How Do You Build Sprawling Storage Facilities in Dense Cities?
The short answer? You don’t. You get creative instead.
Take Chicago’s 325 W. Ohio Street, for example. Located in the trendy and upscale River North neighborhood, where real estate is at a premium, the Life Storage facility located here has managed to find a way to offer self-storage that’s needed in the densely populated neighborhood, while subsidizing the cost of square footage on one of Chicago’s most in-demand blocks: The upper floors of the building are home to a Trunk Club Clubhouse, rented by Nordstrom and used as a combination lounge, patio, and retail space. Here, customers can rent a storage unit, go upstairs for a drink, hang out on the trendy rooftop patio, and meet with a Nordstrom personal stylist, all under the same roof.
This facility is the perfect example of a growing trend in the storage industry: Nontraditional buildings are being repurposed to provide self-storage to areas that need more of it, especially dense urban areas.
In addition to mixed-use facilities, we’re seeing a clearly growing trend in vacant buildings being retrofitted and repurposed as self-storage:
- A former laser tag arena and arcade in Rhode Island was converted to 667 self-storage units.
- A shoe factory that sat vacant for years was bought and converted to self-storage by U-Haul.
- A former indoor sports complex is being eyed for a self-storage conversion project in Massachusetts.
Mixed-Use and Repurposed Spaces Could be the Future of Self Storage
It’s easy to see why these types of conversions are gaining popularity — it’s faster and cheaper to retrofit an existing building than it is to construct a new one. And with the demand for more self-storage square footage remaining high each year, developers and entrepreneurs can get great deals on existing buildings to turn into lucrative storage enterprises.
However, with the coronavirus pandemic driving increased office vacancy, we see a new trend emerging. Commercial landlords and real estate owners don’t necessarily need to undertake an expensive and time-consuming conversion project to start using their vacant space to fulfill self-storage needs across the country.
Meet Neighbor, a New Kind of Storage
In addition to offering peer-to-peer storage rental by helping local residents to rent out extra space in and around their homes to their neighbors, the “Airbnb of storage” is expanding its offerings to create a lifeline for commercial landlords and property owners facing new vacancy brought on by the pandemic.
By listing unused office and commercial space on its storage rental platform, Neighbor is maximizing supply in some of the highest demand areas, and giving new, affordable options to storage renters. San Francisco is only the beginning. Neighbor has plans to expand into commercial space in cities all across the U.S., helping residents find the self-storage space they need, while giving new income-generating options to landlords and building owners.
Ready to learn more? See how Neighbor is driving new self-storage trends at Neighbor.com.
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