Recession-Proof Real Estate

By Myers Reece, 5-06-08

	Caption: Ole Nutteberg, with The Old World Cabinet Company, left, keeps a record of cabinetry pieces being moved off a truck by Curtis Cain into a storage unit at CJ's Storage on U.S. Highway 2. - Lido Vizzutti/Flathead Beacon

They’re often called recession-proof – steady investments that are inexpensive and easy to maintain with consistent profit margins.

Not to mention, they’re one area of real estate that seems mostly unaffected, if not helped, by current rough market conditions.

They’re storage units and people always need them. And in the Flathead Valley, with a growing population that provides a constant supply of people in transit and in need of storage, they’re shooting up everywhere. Storage facilities require relatively low building and management costs.

“It’s a pretty lucrative business actually,” said Tina Wiant, co-manager of CJ’s Storage just north of Glacier Park International Airport.

Storage facility operators are capitalizing on a constant of modern culture: Americans own a lot of stuff. According to the Self Storage Association (SSA), self storage has been the fastest-growing sector of the U.S. commercial real estate market for the last 30 years, growing into a $220 billion industry. The rate of growth, however, has slowed somewhat over the past two years.

A slow housing market can actually help storage facilities, according to industry analysts and local facility operators. As the housing market slumps, people downsize their house sizes and some are even foreclosed upon. People like to hold on to their possessions, and with the same amount of things but less space to put them, they look to storage facilities. Also, hesitant homebuyers store their possessions as they watch what happens to the housing market.

By looking at demographic and growth trends, it’s clear why the Flathead is a popular spot for storage units. Population is growing and while people wait for their homes to be built or are searching for homes, they store away their belongings. Also, people with second homes here often store their large possessions like snowmobiles and RVs in units while they’re away. Lastly, while people from all demographics use storage units, in the Flathead a noteworthy portion of storage renters are wealthy, Wiant said.

Curtis Cain hauls pieces of cabinetry off a truck and into a storage unit at CJ's Storage on U.S. Highway 2.

Wealthier people have more belongings and often rent out more spaces. Wiant said one customer at CJ’s has up to 15 heated units consistently rented out. CJ’s has 699 units in total, some just the basic concrete and metal sheds and others with climate-controlled heating systems. The climate-controlled units maintain a constant temperature of 58 degrees and are used for items vulnerable to the elements like wood and antiques.

The customer with the 15 heated units pays around $2,500 a month to rent them all out, which is more than $25,000 per year coming from one customer, with only minimal maintenance and heating costs.

Also, Wiant said, high fuel prices and economic slowdowns don’t generally deter wealthy people from coming to the Flathead to enjoy their recreation and second homes.

“The rich still want to come here and they still make it happen and that’s a bonus for the Flathead Valley,” Wiant said.

Down the road from CJ’s at Windmill Business Park and Storage, which offers storage units, offices and warehouse facilities, whenever owners Clarice and Wayne Peeler build more units, they fill up right away. Fourteen years ago they started with 150 units and a doublewide trailer that served as their home and office. Today they have a cozy office and more than 700 units.

Clarice Peeler said the days of the mom-and-pop storage units out in the middle of nowhere are over. Today operators need to spruce up their facilities and try to be right in the middle of things to compete in an increasingly competitive storage market. Also, more and more people are jumping into the storage market just for long enough to make some cash and get out, the Peelers said.

“They do it for a five, 10-year investment and then sell it,” Wayne said.

Businesses use storage units too. Wiant said companies like the Old World Cabinet Company use the spaces as warehouses. With the high price of real estate in the Flathead, sometimes it’s more economical to rent storage units than to buy up more space. Altogether, there are at least 70 storage facilities in Flathead County, with more going up regularly.

“It’s unreal,” Wiant said. “And most people are already full.”

One concern for storage operators, though, is the potential for a flooded market. Overbuilding has been a problem for storage facilities across the nation, but the Flathead has so far avoided this trend.

Mark Lister, who opens up Glacier RV and Mini Storage later this month with his wife, said the possibility of overbuilding is definitely on his mind.

“I’ve had as many people tell me I’m crazy that say it’s a good idea,” Lister said. “Whether it’s the right timing or the wrong timing, I’m just going with the plan.” [End of article]