Asset Class Guides

Self Storage Investing Explained

Self storage facilities have generally grown into a recognized commercial real estate asset class over the past several decades, and North Texas, including submarkets around Dallas, TX, has seen ongoing self storage development tied to population growth and residential turnover. Self storage generally offers a different operating profile than traditional commercial property, with a large number of individual month to month tenants rather than a small number of long term leases, which generally allows operators to adjust rental rates relatively quickly in response to demand, but also generally requires active revenue management, marketing, and unit turnover coordination compared to a long term net leased property. Construction and land costs for self storage are generally lower per square foot than many other commercial asset types, though profitability depends heavily on achieving and maintaining strong occupancy in a competitive submarket, since new self storage supply has increased significantly in many growth markets nationally. Self storage held for investment or business use is generally eligible for 1031 exchange treatment, and investors sometimes use exchanges to move between self storage properties in different submarkets, or to diversify into self storage from a different asset class such as retail or land, since the like kind standard for real property is broad under current law. Some investors access self storage passively through a Delaware Statutory Trust interest that holds a diversified self storage portfolio managed by a professional operator, rather than through direct hands on ownership. This page is general education, not investment advice, and specific submarket supply and demand conditions should be researched before acquiring self storage property.