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"Self-storage is completely recession-proof and unrelated to the economy." If someone told you this, they're either misinformed or trying to sell you something. Here's what three major economic cycles actually reveal.
The Bottom Line Up Front
After analyzing performance data across the 2001 dot-com crash, 2008 financial crisis, and 2020 pandemic, the verdict is clear: Self-storage is recession-RESISTANT, not recession-PROOF. It's a defensive sector that consistently outperforms other asset classes during downturns, but it's not immune to economic gravity.
+5.1%
Self-storage REIT returns during 2008 crisis
while overall REITs fell -37.3%
The Evidence: Three Economic Cycles Tell the Real Story
2008-2009 Financial Crisis: Where the Legend Was Born
This is where self-storage earned its defensive reputation during the worst financial crisis since the Great Depression:
Self-Storage REITs
+5.1%
Total Return
Overall REITs
-37.3%
Total Return
Industry value declined only 14.59% while other commercial real estate sectors fell 25-67%
National occupancy held around 80% vs. typical 8% vacancy rates
Net Operating Income never went negative for major REITs (MIT study)
2020-2023 Pandemic Period: Exceptional Performance Creates False Expectations
The COVID era produced the strongest evidence for self-storage resilience but also created unrealistic future expectations:
2021 Returns
32%
Unlevered Total Returns
2022 Returns
16%
Unlevered Total Returns
Vacancy rates fell below 3% (vs. typical 8%)
40% rent increases from June 2020 to March 2022
Supply disruptions limited new construction, tightening markets
2001 Dot-Com Bubble: The More Complicated Story
The 2001 recession reveals why the "recession-proof" claim is oversimplified:
Industry occupancy remained stable at 83-84%
BUT major operator AMERCO (U-Haul's parent) required Chapter 11 bankruptcy restructuring
Oversupply from 1990s building boom created significant competitive pressure
The Academic Evidence: MIT's Rigorous Analysis
A comprehensive 2020 MIT master's thesis provides the most rigorous academic analysis of self-storage resilience:
16.8%
Annual total returns vs S&P 500's 9.0%
over the same decade (MIT study)
Key MIT Finding: "Self-storage properties kept cash flowing and recovered quicker than others during weakened economic periods" with NOI never dropping below zero during the 2008-09 crisis.
The Real Driver: Supply Dynamics Matter More Than You Think
Here's the insight that breaks down the "economy-independent" claim completely:
Critical Insight: Self-storage's recession performance has as much to do with supply constraints as demand stability. When credit tightens, construction financing dries up, limiting new supply and protecting existing operators.
The "Four Ds" Demand Reality Check
The Industry's Famous Demand Drivers:
Death - Estate transitions and belongings management
Divorce - Household division and temporary storage needs
Dislocation - Moving and relocation storage
Downsizing - Reducing living or business space
The crucial insight: These drivers operate differently during economic stress. Recession periods actually increase downsizing, business inventory storage, and forced relocations, while growth periods drive expansion storage, renovations, and lifestyle storage.
Financial Strength: Lower Leverage = Better Defense
Self-storage REITs maintain the lowest leverage among all REIT sectors, enhancing recession resilience:
Self-storage REIT leverage: 19.6% (lowest among 13 REIT sectors)
Fixed-rate debt: 84.3% of total debt
Unsecured debt: 92.4% of total debt
What This Means for Business Owners & Investors
✓ What the Data SUPPORTS:
Consistently outperforms other assets during downturns
Maintains positive cash flow through economic cycles
Lower volatility than broader market
Faster recovery than most commercial real estate
Strong defensive characteristics
✗ What the Data REFUTES:
Complete immunity to economic conditions
No revenue impact during recessions
Uniform performance across all markets
Protection from oversupply challenges
"Economy-independent" claims
Your Action Items
For Business Owners:
Self-storage IS a quality defensive sector with solid empirical backing
BUT it's not immune to economic forces—expect some impact during severe downturns
Monitor local supply pipelines—oversupply can crush returns regardless of demand
Regional selection matters significantly—not all markets perform equally
The Investment Reality: Think of self-storage like utilities or healthcare—a defensive sector that gets affected by the economy but less dramatically than cyclical industries. The "recession-proof" claim is marketing hyperbole, but "recession-resistant" has solid data behind it.
Bottom Line: Self-storage benefits most during supply-constrained periods when credit tightening limits new construction. It's about supply and demand economics, not some magical immunity to market forces.
If you would like to explore investing in self-storage businesses, please contact me.
Brett Vogeler [email protected]
Based on comprehensive analysis of industry data, academic research, and three major economic cycles
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