If you’ve been reading or listening to the news, you cannot help but feel that eerie pit in your stomach as you absorb the cloud of economic gloom. But is this doom really true for every industry? Forecasting the economic future for Canada is a challenge and may take some time to clearly define just how dismal it will be.
However, investment and developing in the self-storage industry may be another consideration entirely. While the country’s economy as a whole may thrive on the consumer’s ability and desire to buy, the storage industry is an all-weather profit center that has proven to do fairly well during difficult times.
This business is somewhat insulated from financial woes as an integral service to companies or people who are downsizing or experiencing some type of transition. Therefore, the demand for storage is likely to increase through a tough economic period. This could subsequently increase new self-storage construction and momentum for facilities across the country.
A Good Time for Investment
There are numerous reasons why this economy can be favorable for self-storage development in Canada. Just look at the way developers are pulling back from retail, home and industrial developments that require the consumer engine to be running at full strength. These developers are not going dormant; they’re seeking to refocus on other avenues to generate income. Self-storage provides new opportunities for investment.
In addition, there is an increase in availability of skilled tradesmen from other slowing industries, so the cost of labor is lower. Self-storage construction methods have also become more cost-effective. Although the popularity of multi-story structures has ebbed due to the challenge of finding suitable land, we are now seeing conversions of existing industrial or warehouse buildings in prime municipal locations.
Conversion developments change existing single-story industrial buildings into two-level storage facilities that maximize profit by doubling the rentable space. Falling real estate values of existing buildings also makes them an attractive option for Canadian developers, owners and investors. Just look at the declining purchase price of a 50,000-square-foot industrial building―an acceptable candidate for self-storage conversion in most cities. The cost savings of 10 percent to 20 percent from just a year ago would make any investor or developer’s heart skip a beat with excitement.
Lending Options
On top of this massive boost to your bottom line, institutions that lend to developers in all industries have reviewed their levels of exposure and risk. We’re seeing major reductions in lending ratios for industries that have cooled; but as recent as mid-March, we saw one developer receive financial approval from a major institution for a new self-storage facility with a favorable 70/30 investment ratio.
With its solid track record―not just enduring but growing despite numerous shifts in the economy over more than three decades―the self-storage industry is seen by many as a stable and worthy investment. Even private funding is gaining ground in the amount of investment exposure.
There are plenty of reasons to get into the self-storage business at any time. However, now is the time to take advantage of lower construction and labor costs along with rising profitability to maximize your harvest of success and abundance. The return on investment will be more than satisfying to any investor looking for a sturdy ship to weather through our current economic condition.
Richard Leach of Richard Leach and Associates Inc., in Brampton, Ontario, is also a marketing consultant for the Ontario-based Canadian Metal Manufacturing Inc., which develops turnkey self-storage systems. Established in 1999 as a metal fabricator, the company has been in the self-storage industry since 2003. For more information, call 905.951.1762; visit www.canadianmetal.ca.
