Is The Self Storage Industry Recession-Proof? A Conversation With Peter Margolin

This article originally appeared on CPExecutive.

Peter Margolin of Alliant Credit Union reveals what makes self storage recession-resistant and hints at strategies that could be adapted to avoid potential risks.

Self storage has long had the reputation that it is that one asset class that could easily survive a downturn as it provides consistent cash flows and revenue. Nonetheless, investors need to be cautious to avoid risks when it comes to new investments and should carefully assess what type of financing could keep them above the water.

Commercial Loan Originator Peter Margolin of Alliant Credit Union shares his insights on the self storage sector and reveals the vulnerable points of the business and the impact of a potential recession.

What are the biggest challenges in the self storage financing landscape?

Margolin: The self storage business provides consistent cash flows and revenue, making it attractive to both private and institutional investors alike—but it’s almost too good for its own good. Since seemingly everyone wants to be in self storage, overdevelopment is probably the biggest challenge right now, not to mention the highly competitive financing market as transactional activity has diminished in the face of economic uncertainty.

How have the needs of self storage borrowers changed in the last few years? What do you expect going forward?

Margolin: The needs of self storage borrowers vary depending on whether they are financing a new development or an existing asset.

Investing in Opportunity Zones has become increasingly popular. How is this trend impacting the self storage landscape?

Margolin: Within Opportunity Zones, self storage owners are getting outbid by developers who want to build property types that bring in more revenue, such as multifamily and retail.