Now at 326 million, the U.S. resident population grew by 2.3 million residents (or 0.7%) from July 1, 2016 to July 1, 2017. However, that increase did not start a new trend. In fact, the U.S. population has grown by approximately 2.3 million residents or 0.7% in each measured time period since 2010.
However, population growth is not uniform across the country. For example, the Dallas MSA experienced the largest increase last year with the addition of over 146,000 residents. The Houston and Atlanta MSAs also had large resident increases of 94,000 and 89,000, respectively. Conversely, Chicago and Pittsburgh have the largest drops in population of all U.S. MSAs.
Along with this growth in population comes an increased need for goods and services – such as growth in the housing market, commercial development, and of course, self storage space. Since population growth is not equal across regions, opportunities for new supply can and will vary by market and regional area. And as such, areas with declining populations are likely to experience weaker demand and less need for additional storage space.
Using these updated population projections as a guide, STR evaluated its self storage database, which includes both open properties, as well as, properties currently under development, to determine if areas of higher population growth are witnessing increased levels of self storage development. STR currently maintains census and pipeline data for 56 of the nation’s top metropolitan statistical areas (MSAs).
Altogether, we analyzed more than 17,000 open self storage properties and more than 2,100 self storage properties under development in the context of population growth from 2010 to 2017. What we found can be used as a building block for understanding the role that population plays in influencing the self storage industry.
The self storage industry is in the midst of an unprecedented development cycle. According to the U.S. Census Bureau, construction spending in the sector reached an all-time high of $3.98 billion in 2017. That level represented a 108% increase from 2016 spending levels ($1.91 billion) and a 317% increase from 2015 levels ($955 million). But while we see this growth occurring, the question remains: what are the factors that are driving this growth? We believe that population growth, amongst other factors, such as housing prices, migration patterns and job growth, have influenced this growth in self storage development.
Over the past year, STR has released several reports that anecdotally explain the role population and economic growth have in self storage markets. For instance, when evaluating the Raleigh, N.C. self storage market, we found that not only did Raleigh have the third-highest population growth from 2010 to 2016, the Raleigh MSA ranks among the nation’s fastest growing in terms of self storage supply projected to come online within the next 12 months. Furthermore, Raleigh’s self storage growth is concentrated in the high growth population jurisdiction of Wake County.
For Seattle, record-high job growth, coupled with a strong population increase and a booming housing market, have contributed to robust growth in the self storage development pipeline. That area, with an average of 1,100 residents moving to Seattle every week, has a burgeoning self storage supply, which is expected to grow more than 20% over the next 24 months.
As a final example, we looked at Chicago, which has had the largest population decline of any MSA in recent years. Subsequently, self storage development in Chicago is softening, given factors such as low square footage growth, low square foot per capita growth and volume of deferred projects.
The common theme that we have found is that quantifying population growth offers a framework by which we can begin to explain self storage growth. Still, it is difficult to discern trends using only anecdotal information.
To further this analysis, STR analyzed population trends reported by the Census Bureau across the nearly 400 counties within the top 56 MSAs that STR covers in order to understand the increase in net rentable square feet (NRSF) that is projected to occur within the next 12 months.
Identifying each county’s population growth, we separated each of the approximately 400 counties into one of four quartiles based on their population growth from 2016 to 2017. The first quartile is comprised of counties that have the lowest population growth, while the fourth quartile is comprised of counties that have the highest population growth.
Examining population growth from 2010 to 2017, over the next 12 months, STR projects that the counties in the first quartile (lowest population growth) will see a 5.7% increase in NRSF growth; the second quartile will experience 5.7% NRSF growth; the third quartile will grow 7.4%; and the fourth quartile (highest population growth) will post a 9.4% increase in NRSF.
The trend is also apparent when looking at population growth from 2016 to 2017 where the projected increased over the next 12 months is 5.7% for the first quartile and 9.7% for the fourth quartile.
Digging down deeper and looking at the most extreme instances of growth patterns, and analyzing the five highest and lowest growth counties in terms of population change, we find the disparity between projected NRSF growth to be much more dramatic with the five highest growth counties (areas like Austin and Washington, D.C.). Those areas are projected to have a 14.7% increase in NRSF compared to a much more modest 5.2% increase projected in the five lowest growth counties (areas such as St. Louis and Baltimore).
It is important to note, however, that strong population growth stats indicate likely demand increases as well. However, the NRSF percent increase expected in the next year for each of these MSAs is significantly larger than the annual population growth rate. The demand increases driven by population growth may ease some of the potential downward pressure on facility occupancy rates. However, it is impossible to know the true impact of new supply or the true increase in demand without monitoring market operator performance.
While we continue to find that population growth offers a unique insight into understanding self-storage development, STR will continue to analyze this and other factors that can contribute to our understanding of self-storage markets. With a more comprehensive set of indicators to illustrate each market, it will be important to examine each market on its own merits and to define the factors that are occurring alongside population growth, such as rate and occupancy trends, market saturation, and local economic health.
 STR defines any properties that are in the Expansion, Final Planning or In Construction to be expected to open within 12 months.