Self-Storage Operators Top List Of Best Alternative Investments
STEVE INSKEEP, HOST:
Every year, Bloomberg Markets magazine puts together a list that ranks the best performing alternative investments. That would include things like investing in art or bottles of wine or even a 1967 Ferrari. The new list is out and to learn more about where you may want to store your money, we reached Devin Banerjee, who's the U.S. investing reporter for Bloomberg News.
DEVIN BANERJEE: This year we were very surprised to find that self-storage operators topped our list. So they're part of a category called industrial REITs: real estate investment trusts. And these vehicles returned 17.4 percent a year over the past three years. And that topped the stock market; that topped the bond markets; that topped other alternative markets like the private equity markets, for example. And so we were surprised and we dove into industrial REITs and found that some of the usual suspects were there - health care REITs, for example, have been increasingly popular especially with healthcare reform. But we found that 3 of the top 5 industrial REITs were self-storage REITs. And we had not seen this before.
INSKEEP: Why is this such a profitable business right now?
BANERJEE: So there are several demographic trends, first of all. For example, homeownership - typically when a family purchases a home, it has space for all of those things it's collected over the years and the decades. As you may know Steve, homeownership is at its lowest point in the U.S. in 19 years, 64.7 percent in the second quarter. That's the lowest since 1995. People are not upsizing their homes. People are trying to save money after the recession and waiting a little longer. That means all of those books, all of that extra furniture, all of those children's toys that you've built up over the years, you don't really have a place to put it. You're finding self-storage - that's one reason certainly. Other reasons, you know, research has shown that our desire and our need for self-storage arise from major significant life events: marriages, divorces, job changes. So one other thing that industry analysts have pointed us to is job changes, job transients. Since the recession, you know, companies are increasingly relying on temp workers. People are moving around. People are being laid off. These types of life events are what researchers have found increase the demand for self-storage.
INSKEEP: So the wreckage of American life has been good for business in self-storage is what you're saying.
BANERJEE: That's true. That is one key demographic trend supporting self-storage.
INSKEEP: I'm wondering if there's something else as well, in that there is a trend toward moving into center cities where you tend to have less space. And therefore, you just need the storage locker for your extra stuff.
BANERJEE: That's also certainly a demographic trend supporting it. As the multifamily, you know, residential market does so well - which is another way of saying apartments - many people just living in apartments - that means you have less space for your things. That means you're looking for a cheap place to store your extra things and you're finding self-storage.
INSKEEP: Now, when you went through this list of unusual investment opportunities, you also came up with stamps and coins?
INSKEEP: Which sounds a little quaint. Is that actually a serious investment - stamps - in 2014?
BANERJEE: You know, a lot of people who have that even extra disposable income have looked to stamps, coins, wine, antique cars - these are categories we always include on our list. Wine overall did not do very well. But certain vintages - if you find a vintage Chateau Pavie from the Bordeaux region of France. For example, a 2001 vintage or a 2004 vintage - these stand out on our list. But certain coins - for example, from the 1500s from England did very well. Certain stamps also from England have done very well. And, you know, the supply of these are dwindling. They're very hard to maintain their high quality and so each year, many of these actually become more valuable.
INSKEEP: So buy some coins, buy some rare wine and fill up a self-storage locker with it.
INSKEEP: That would be an investment strategy.
BANERJEE: That would be the ultimate investment strategy.
INSKEEP: Devin Banerjee, thanks very much.
BANERJEE: Thanks, Steve, appreciate it.
INSKEEP: Devin Banerjee reports for Bloomberg News.