8 Pros and Cons of Owning a Storage Facility [2025 Guide]
Are you considering potential business ventures for 2025 and beyond? If so, you likely have a shortlist of options you want to explore further before making a final decision. Owning a storage facility is one business idea that you might want to consider adding to that list, and for valid reasons.
The self-storage industry has shown remarkable resilience and growth in recent years. It’s predicted to grow at a CAGR of 7.53% between 2022 and 2027. However, before you commit significant capital to this endeavor, it’s crucial to weigh the advantages and drawbacks carefully.
In this article, we explore the pros and cons of owning a storage facility. We’ll cover key information like costs and potential profits this business idea can generate for a well-informed decision.
5 Pros of Storage Facility Ownership
Owning a self-storage facility offers several perks, including:
Stable and profitable investment
Recession-resistant nature
Low maintenance and management requirements
Potential for additional revenue streams
Favorable financing options
1. Stable and Profitable Investment
Owning a storage facility can be a highly lucrative venture. The self-storage industry has demonstrated robust returns for commercial real estate investors, with an expected market valuation of $115.62 billion by 2025. Also, between 2009 and 2018, the average annual return on investment (ROI) for self-storage facilities was an impressive 16.9%. This performance outpaced other commercial real estate sectors, making it an attractive option for those pondering if owning a storage facility is profitable.
Note: In the later parts of this article, we’ll elaborate on the factors that drive profitability in the self-storage industry.
2. Recession-Resistant Nature
One of the most significant pros of owning a storage facility is its resilience during economic downturns. The self-storage industry has proven to be recession-resistant, consistently generating positive returns even during challenging economic periods. This stability is attributed to the constant demand for storage space, driven by various life events such as relocation, downsizing, or business transitions.
3. Low Maintenance and Management Requirements
Another perk is that self-storage facilities typically require less maintenance compared to other real estate investments like buy-to-lets. The simplified nature of self-storage units means fewer complex systems to maintain and repair.
Additionally, advancements in self-storage technology have made it possible to manage day-to-day operations remotely, further reducing the hands-on management required. Now, operators can easily set up an automated self-storage facility by utilizing the expertise of providers like Unwired Storage.
4. Potential for Additional Revenue Streams
Storage facility owners have the opportunity to diversify their income through ancillary products and services. By providing local businesses and households with extra services like moving supplies, locks, and insurance, facility owners can boost their revenue while providing added value to their customers. This flexibility allows storage businesses to adapt to market demands and differentiate themselves from competitors.
5. Favorable Financing Options
For those looking to enter the storage facility market, financing has become increasingly accessible. SBA 504 loans now allow investors to start a storage unit business with as little as a 10% down payment. These loans often come with competitive long-term interest rates, making it easier for entrepreneurs to enter this promising market.
By understanding these advantages, you can make informed decisions about whether owning a storage facility aligns with your business goals and investment strategies. However, storage facility ownership equally has its downsides, as we’ll observe below.
3 Cons of Owning Storage Units
While owning a storage facility can be profitable, it’s crucial to consider the potential drawbacks before diving into this business venture.
Some of the challenges you might face when starting a self-storage business include:
High initial investment
Ongoing maintenance and security costs
Technological adaptations
1. High Initial Investment
One of the primary cons of owning a storage facility is the substantial upfront cost. According to Inside Self-Storage, underestimating total project costs can lead to significant financial troubles. The expenses include land acquisition, construction, security systems, and climate control equipment. These costs can quickly add up, making it challenging for new investors to enter the market without substantial capital.
Note: Further analysis of the initial costs will follow shortly.
2. Ongoing Maintenance and Security Costs
While storage facilities may seem low-maintenance, they still require constant upkeep to remain competitive and secure. This includes regular repairs, upgrades to security systems, and potential renovations to meet changing customer needs. These ongoing expenses can eat into your profits and should be factored into your business plan when considering how much it costs to start a storage unit business.
3. Technological Adaptations
As technology evolves, storage facilities must keep pace to remain competitive. This may involve implementing advanced security systems, online booking platforms, or automated access controls.
The cost of these technological upgrades can be significant and ongoing, impacting your bottom line. Luckily, Unwired Storage, a specialized innovative technology provider for the self-storage industry, offers reliable automated solutions with ongoing maintenance. Reach out to us to learn more about our self-storage automation services.
Of all these, the most pressing concern for potential self-storage investors is costs. Continue reading as we provide a detailed breakdown of how high these figures can go.
Startup Costs: How Much Does it Cost to Build Storage Facilities?
When considering owning a storage facility, one of the first questions that comes to mind is: “How much does it cost to start a storage unit business?” The answer can vary widely depending on several factors; let’s break down the typical expenses you might encounter.
1. Land Acquisition and Construction
The most significant chunk of your startup costs will go towards land acquisition and construction. According to industry estimates, land acquisition and site preparation can range from $500,000 to $2 million, while construction and development costs typically fall between $1 million and $5 million.
2. Permits, Equipment, and Infrastructure
Don’t overlook the costs associated with permits, licenses, and legal fees, which can add up to $50,000 to $150,000. Additionally, you’ll need to budget for equipment and technology infrastructure. This includes security systems, climate control units, and tenant management software, potentially costing between $50,000 and $200,000.
3. Marketing and Operational Costs
To ensure your storage facility is profitable, you’ll need to invest in marketing and branding. Set aside $25,000 to $100,000 for these efforts.
Other operational costs to consider include:
Insurance and risk management: $20,000 to $50,000
Staffing and training: $50,000 to $150,000
Utility connections and setup fees: $25,000 to $75,000
Inventory and initial supplies: $10,000 to $50,000
Total Investment Range
Taking all these factors into account, the total startup costs for launching a self-storage business can range from $1.73 million to $7.775 million. However, most of these costs are not recurring and are only applicable if you’re building the facility from scratch. If you’re buying an existing facility or paying a self-storage development company, the facility builder will be responsible for paying some costs.
When weighing the pros and cons of owning a storage facility, remember that while startup costs are significant, the potential for steady cash flow and high returns makes it an attractive investment option for many. We’ll now wrap up with an analysis of the various factors that can boost profitability in self-storage businesses.
The Potential Profits of Owning Storage Units
When considering the pros and cons of owning a storage facility, one of the most compelling advantages is the potential for substantial profits. The self-storage industry has demonstrated remarkable profitability, with typical profit margins of around 41%. This impressive figure stems from several factors that make storage facilities an attractive investment opportunity, including the following:
1. Flexible Pricing
Storage facility owners benefit from the ability to adjust pricing frequently, enabling them to respond to market demand and optimize profitability. This flexibility allows for regular rent increases, helping to maintain strong profit margins over time.
2. Strong Growth Potential
The self-storage industry has demonstrated remarkable resilience and growth potential. Forecasts indicate an 8% annualized growth rate in the US market from 2020 to 2025, suggesting that the demand for storage facilities is likely to remain strong in the coming years.
This growth trajectory is further supported by the performance of public self-storage REITs, which have reported strong Net Operating Income (NOI) growth. For example, Extra Space Storage is expected to see improved demand dynamics in 2025, indicating potential for increased profitability across the industry.
3. Tax Advantages
One often overlooked aspect of storage facility ownership is the potential for significant tax savings. Self-storage owners can benefit from strategies like bonus depreciation and cost segregation, which can result in substantial reductions in federal income taxes.
These tax advantages can provide a significant boost to cash flow, especially in the early years of ownership. For instance, bonus depreciation allows for a 100% upfront deduction of qualified personal property, creating immediate tax benefits that can offset the initial investment costs.
Ultimately, a storage facility’s profitability depends on various factors, including location, market demand, and operational efficiency. Nonetheless, the attractive profit margins, growth potential, and tax advantages of owning a storage facility make it a lucrative investment opportunity for those willing to navigate the industry’s unique challenges.
Contact Unwired Storage today to learn more about how you can start an automated self-storage business.
Frequently Asked Questions
Is owning a storage unit profitable?
Owning a storage unit can be profitable, with new self-storage businesses boasting a 92% success rate. On average, storage facility owners may earn around $184,500 annually, making it a potentially lucrative investment. Still, it’s important to carefully evaluate the pros and cons of owning a storage facility before investing in this industry.
What are the pros and cons of storage units?
Investing in storage units offers benefits like low risk, high demand, stable income, and low maintenance. However, challenges include tricky market positioning and the need for active management. A successful self-storage business will require strategic oversight to maintain profitability and adapt to market dynamics.
Is a storage company a good investment?
A storage company can be a good investment due to its low operating costs and decent profit margins. It offers economic durability, making it ideal for risk-averse investors seeking a passive income source and portfolio diversification. Still, like every industry, the self-storage business does come with its risks. Evaluate the benefits and downsides carefully and do due diligence before investing in this business idea.
Conclusion
As you consider whether owning a storage facility is right for you in 2025, carefully weigh the potential benefits against the challenges. While steady demand and passive income are appealing, increased competition and evolving consumer preferences may impact profitability. Your success will depend on choosing an optimal location, leveraging technology, and providing exceptional customer service.
Before making this significant investment, ensure you conduct thorough market research on the pros and cons of owning a storage facility and craft a solid business plan. Ultimately, a well-run storage facility can be a lucrative venture, but it requires dedication, adaptability, and a long-term commitment.
Contact Unwired Storage today to learn how our automation and management software can help you launch a successful self-storage business.
