Self-Storage Investing in the U.S.: High Margins, Low Maintenance CRE Assets

04/29/2025

Industry Insights

Self-storage facilities have earned a reputation among real estate investors as high-margin, low-maintenance assets that deliver steady income with minimal hassle. This niche sector – once considered a backwater of commercial real estate – is now firmly in the spotlight for its exceptional operational efficiency and resilient demand. Seasoned brokers and institutional investors alike recognize that self-storage combines reliable cash flow with lean operations in a way few other property types can match.

Self-Storage Boasts High Profit Margins and Steady Cash Flow

Is self-storage a good investment?

Yes. Self-storage has consistently proven to be a strong investment, offering robust profit margins and stable returns across market cycles. In fact, self-storage was the best-performing real estate asset class over the past few decades in terms of average annual return, surpassing traditional sectors like apartments, retail, and office. Investors are drawn to these properties for their ability to generate income even when other assets falter. The typical self-storage facility operates with an impressive profit margin (often around 40%), significantly higher than many other commercial real estate categories. This means a well-run facility can net substantial income relative to its gross revenue. It’s not uncommon for a mid-sized facility to produce six-figure annual profits for its owner, all while maintaining occupancy rates of 85–95% or more due to constant demand. Such healthy margins and consistent occupancy underscore why self-storage is widely regarded as a lucrative, “cash cow” asset class in the U.S. commercial real estate market.

Not only are individual facilities profitable, but the self-storage sector as a whole has delivered strong returns for investors. Industry-wide revenues have been climbing (with U.S. self-storage revenues now topping $35 billion annually) and public self-storage REITs have outperformed many other REIT sectors over the long term. Over 52,000 storage facilities operate across the country – serving roughly one in ten American households – and yet occupancy levels remain very high on average. This combination of ubiquity and high utilization speaks to an asset type that reliably produces cash flow. During economic expansions people accumulate belongings and businesses stockpile inventory, driving demand for extra space; during downturns people downsize or temporarily store possessions, again driving demand. The result is steady rental income for facility owners through good times and bad. In short, self-storage investments are prized for their high-yield characteristics and dependable income streams that can anchor an investment portfolio.

How profitable are self-storage businesses?

Self-storage facilities can be extremely profitable when properly located and managed. A key reason is their lean expense structure. Unlike apartments, office buildings or hotels, storage properties have no costly appliances or intensive utilities to worry about, and they require minimal staffing. As a result, a greater share of each rental dollar turns into net operating income. Many facilities achieve break-even occupancy at far below 100% (sometimes around 60% or even less), meaning they can cover all expenses and debt service while still half-empty. Once occupancy rises to a typical 90%+ level, most of the additional rent is pure profit. For context, industry analysts often cite average EBITDA margins in the 30–40% range for self-storage – among the highest of any real estate asset type. By comparison, multifamily or office properties might see much lower margins after paying for maintenance, management, tenant improvements, and so on. In real terms, an average self-storage facility might gross several hundred thousand dollars per year in rental revenue and end up with well over $150,000 in annual profit after expenses. Top-performing facilities in prime markets can earn substantially more. This high-profit potential, coupled with relatively predictable operating costs, makes self-storage businesses very attractive from an investor’s standpoint.

Operational Efficiency: Low Maintenance and Minimal Management

Why are self-storage facilities low maintenance?

The “low maintenance” reputation of self-storage is well deserved. These properties are fundamentally simple in design and operation. A standard self-storage facility is essentially a collection of garage-like units – often metal or concrete structures – that require little more than basic upkeep. There are no complicated building systems, no plumbing in each unit, no common hallways to clean daily, and no need for extensive climate control in many cases (except at facilities offering climate-controlled units as a premium feature). Day-to-day, the maintenance may involve periodic sweeping, pest control, lighting checks, gate repairs, and landscaping – tasks that are infrequent and relatively low cost.

Because tenants only use storage units to stow possessions (not to live or work in), the wear-and-tear is minimal. There are no toilets to fix at midnight, no leaky roofs ruining someone’s living space, and no heavy machinery to service beyond perhaps security systems or automatic gates. In fact, many newer self-storage facilities operate with zero on-site staff at certain times – employing kiosks, electronic locks, and surveillance cameras so that renters can move in or out and make payments without a manager present. Some facilities are entirely unmanned, managed remotely with software and occasional maintenance visits, which further reduces personnel costs.

This operational simplicity translates into low overhead. Property taxes and insurance are often the largest expenses, along with the mortgage if the property is financed, but even these costs are modest relative to the revenue potential. Many storage owners also pass through expenses like utilities and security via CAM (Common Area Maintenance) fees or simply incorporate those costs into rent, keeping their net expenses predictable. Overall, the business model is about as straightforward as it gets in real estate. As one industry maxim goes, self-storage is about “renting empty space” – there are no furnishings or supplies provided beyond four walls and a door. This simplicity makes self-storage far easier to manage than, say, an apartment building full of tenants with daily service needs.

From a management perspective, a single employee can often oversee a facility of several hundred units, handling customer inquiries, move-ins/move-outs, and maintenance coordination. And if a tenant fails to pay, operators have legal remedies to quickly auction off the contents of the unit and re-lease the space – a far simpler process than evicting a residential tenant. In short, the low maintenance nature of self-storage reduces both the monetary costs and the time/effort required of owners. For busy investors or those looking for more passive real estate plays, self-storage offers an appealing combination of limited headaches and solid cash flow.

Resilient Demand Through Economic Ups and Downs

Are self-storage facilities recession-proof?

No investment is entirely recession-“proof,” but self-storage comes close. The sector has a demonstrated resilience in economic downturns, often outperforming other property types when times get tough. The reason lies in the fundamentals of demand for storage. People rely on storage units during transitional periods and life changes – events that happen in all economic climates. For example, during a recession, some individuals may downsize to smaller living quarters or move back home to save money, but they don’t necessarily get rid of all their belongings. Those extra possessions often go into storage. Similarly, small businesses might close physical offices or excess inventory during a slow economy, but they use storage units to archive files, equipment, or stock until better days. Historically, self-storage occupancy actually got a boost during the 2008 financial crisis for exactly these reasons, and the self-storage REITs were one of the only REIT sectors to post positive returns in 2008. In subsequent recessions, the pattern has been similar – storage demand tends to hold steady or even increase as households consolidate and need someplace to put their stuff.

Apart from recession scenarios, the everyday demand drivers for self-storage are diverse and ongoing. Known in the industry as the “4 Ds” – death, divorce, downsizing, and dislocation (moving) – these life events continually generate needs for extra space. When people marry or split up, when an elderly parent passes and the family needs to store inherited furniture, when retirees downsize from a house to a condo, or when a job relocation requires a temporary move, self-storage is the convenient solution. These situations aren’t tied to the boom/bust cycle of the economy; they occur steadily, year in and year out. That’s why occupancy rates nationwide have historically remained high (often in the 90% range) and why rent rates have trended upward over time, even if they moderate during short-term gluts of new supply.

Even inflationary periods have favored self-storage. Because leases are month-to-month, operators can raise rents frequently – even multiple times a year in small increments – to keep pace with rising costs. Renters tend to absorb these increases since moving everything out to save a few dollars is often more trouble than it’s worth. This gives storage owners a rare pricing power in inflationary times, protecting their real returns. It’s no surprise that in recent years, large institutional investors have poured capital into self-storage acquisitions and development. They view it as a defensive play: an asset class with inelastic demand that can weather economic storms while also adjusting to inflation. For investors seeking stability, self-storage’s performance history – steady occupancy, low loan default rates, and quick recovery from downturns – confirms its status as one of the most recession-resistant corners of real estate.

How to Invest in Self-Storage

Thanks to its attractive profile, the self-storage sector has seen a surge of interest from all types of investors. There are several avenues to gain exposure to self-storage investments:

Direct Ownership of Facilities: Purchasing a self-storage facility (or developing one from the ground up) offers direct control and potentially higher returns. Investors can buy existing facilities, often from mom-and-pop operators, and add value through better marketing, occupancy improvements, and rental rate optimization. Direct ownership requires substantial capital and active management or hiring a professional management company. However, it allows investors to capture the full benefit of a facility’s cash flow and appreciation. Platforms like the Brevitas marketplace facilitate access to off-market and listed self-storage properties for sale, connecting buyers with brokers and sellers across the U.S.
Invest in Self-Storage REITs: For a more hands-off approach, individuals can invest in publicly traded self-storage REITs (Real Estate Investment Trusts) such as Public Storage, Extra Space Storage, CubeSmart, and Life Storage (now part of Extra Space). These large companies own and operate thousands of facilities and offer investors a liquid, stock-like way to participate in the sector’s performance. Self-storage REITs typically pay regular dividends and have historically delivered strong total returns, leveraging economies of scale in operations and marketing. By buying shares of a storage REIT, investors effectively own a slice of a nationwide self-storage portfolio managed by experienced professionals.
Private Equity, Funds, or Syndications: Another route is to invest through private real estate funds or syndications that focus on self-storage. In recent years, specialized private equity firms and crowdfunding platforms have been aggregating capital to acquire storage properties. These arrangements let investors participate passively, often with lower minimums than buying an entire facility on their own. For example, a syndicator might pool funds from dozens of investors to purchase a portfolio of regional self-storage sites, then distribute rental income and eventual sale profits back to investors. While less liquid than REITs, private storage funds can offer diversification and professional management, and they may target value-add deals in secondary markets that yield higher returns. Investors considering this path should conduct due diligence on the track record and fees of the fund sponsor or syndicator.

No matter the approach, it’s clear that self-storage is no longer an “alternative” niche – it’s a mainstream asset class with multiple entry points. Seasoned real estate executives often recommend combining strategies (for instance, holding some REIT shares for liquidity while also owning facilities directly for higher yield). The right choice depends on an investor’s capital, desired involvement level, and return objectives. Regardless of method, the fundamental appeal of self-storage – high margins, low maintenance, resilient income – remains the driving force attracting investors.

Key Risks and Considerations for Self-Storage Investors

What are the risks of investing in self-storage?

While the outlook for self-storage is broadly positive, investors should be mindful of a few challenges and risks in this sector:

Local Supply & Competition: Self-storage has relatively low barriers to entry, and during boom periods developers can overbuild in a hot market. An area that suddenly gets several new storage facilities may see rents stagnate or occupancy dip as supply outpaces demand. It’s crucial to study the local market — population growth, existing storage square footage per capita, and planned projects — before investing. Choose locations with strong demand drivers and limited existing competition to mitigate this risk of saturation.
Zoning and Community Pushback: In some regions, getting approval to build a new storage facility can be challenging. Municipalities sometimes restrict new storage developments through zoning, or residents may oppose them (preferring other uses for available land). This can be a hurdle for developers but also creates an advantage for owners of existing facilities (less new competition). Investors should be aware of the regulatory climate for storage in their target area.
Management and Security: “Low maintenance” doesn’t mean “no maintenance.” Facilities still require active management to keep occupancy up and delinquency down. Theft or vandalism is a potential issue; a poorly managed facility that isn’t kept secure and clean could lose business quickly. Investors must ensure they or their property managers have solid operational plans — ranging from marketing to security systems — to protect the facility’s reputation and income.
Rising Interest Rates: Like all real estate, self-storage investments can be sensitive to financing costs. The sector’s cap rates compressed significantly as it gained favor; if interest rates rise, property values could face pressure, and highly leveraged owners might see cash flow tighten. That said, the strong income profile of storage often provides a cushion, and many investors use fixed-rate debt to lock in stable financing costs.
Economic or Behavioral Changes: Over the long term, shifts in consumer behavior (for instance, a cultural move toward minimalism or decluttering) could temper storage demand. So far, the trend has been the opposite — Americans continue to accumulate goods and value having extra space. However, investors should keep an eye on demand patterns. Additionally, disruptive models like peer-to-peer storage (neighbors renting out spare garage space via apps) have emerged, though they remain a very small niche and have not significantly impacted traditional self-storage operators.

In summary, the risks associated with self-storage are generally manageable and are often outweighed by the sector’s strengths. Prudent investors conduct thorough due diligence: they analyze supply and demand in the trade area, evaluate the condition and layout of the facility (for example, units on a second floor without an elevator may be less desirable), and create realistic financial projections. It’s also wise to have an experienced management team in place – whether it’s a third-party operator or a strong on-site manager – to maximize occupancy and efficiently handle the day-to-day tasks. By understanding and planning for these considerations, investors can confidently capitalize on the high-margin, low-maintenance benefits that make self-storage such an attractive asset.