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22 Feb 2022

Is Self Storage a good hedge against inflation?


James McLean

Union Realtime

Prices have gone up. You may have noticed that a trip to the grocery store or filling up a tank of gas has been a lot more expensive than the previous year. This is due to inflation depreciating the value of the U.S. dollar. Inflation is at 7.5% which is higher than expected of 7.3%- causing issues for the everyday person. With inflation rates expected to increase even more, people should consider parking their wealth into an asset class that can outpace inflation. Self Storage has proven to be recession resilient and grown tremendously in the past couple of years.

Self Storage is a great option to invest in to hedge against inflation. Month to month contracts allow facilities to have dynamic pricing when compared to apartments or warehouse spaces that usually do year long contracts at minimum. As quickly as a market changes, a self storage facility can alter their prices as well, reducing the chance to leave money on the table. Also, incremental increases to a unit's rent may not be drastic enough to cause a tenant to remove their items and move out the unit, but it will cause a notable increase in facility revenue. This allows Self Storage investors to adapt to increased inflation subtly while maintaining profits.

Demand for Self Storage is on the rise. From January 2021 to January 2022 we saw over a 20% increase in price per square foot. COVID-19 caused many Americans to downsize, move back home or relocate. This has been even furthered by the new trend towards remote work in many industries. All these factors have driven Self Storage demand, as people still want a safe and secure place to store their belongings while figuring out where they want to go to grow their roots.

In conclusion, with inflation on the rise people should be looking for smart investments to park their money so that their funds will not depreciate alongside the value of the U.S. dollar. Self Storage provides an option that merits consideration.

Data sourced from the Radius+ Insider Page

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