18 May Should Bay Area Self Storage Operators Worry About a San Francisco Exodus?
By Alex Hassel, Storage.com
A new survey released by the Bay Area Council shows that a large segment of the San Francisco area’s residents aren’t planning on sticking around. 34% of those questioned for the study say they’re likely to leave the region in the next few years due its lack of affordability. 25% of all respondents said the area’s cost of living was the top issue. 23% said the related problem of housing prices was driving them out.
According to the Bay Area Census, the area was home to around 7 million people in 2010. By that count, with roughly 2.3 million wanting to move out, this could have a largely negative impact on the region’s economy, especially its self storage industry.
Jim Wunderman, President and CEO of the Bay Area Council, is skeptical that so many people would actually leave, but he doesn’t want to take any chances either.
“This is our canary in a coal mine,” he says. “Residents are screaming for solutions. Do we expect to see more than 2 million residents up and leave? Of course not, but losing even a fraction of that number and the talent they represent because we failed to deal with our most pressing issues would be very bad. We need to act with urgency, we need to act decisively, and we need to act regionally to address the underlying problems of housing and traffic that are causing discontent and aggravation.”
These issues won’t be an easy fix, though. Tim Gullicksen, a real estate agent with Gullicksen Group, says housing costs, for example, have been a chronic problem. “It’s been a systematic issue for a long time,” he says. “The area is constantly adding jobs and population, but the rate of new housing is nowhere close to where it needs to be.”
Little housing supply in the Bay Area drives up prices. Finding a way to get those costs down, Gullicksen says, is the biggest challenge of all.
“We need massive amounts of development, but there’s nothing in the works right now. In San Francisco, we’ve added thousands of below market rate units that have helped, but it’s still not enough. I believe the problem is that aside from San Francisco, we’re a bunch of little towns. We need to become one large governmental agency like New York City did when it started that way. Then, the area could actually move and make decisions in sync.”
With such high demand in the market, renting living space is the most popular choice for Bay Area residents. Using the 2010 census information, Paragon Real Estate Group found that 328,000 residents in San Francisco owned their homes while 453,000 rented.
Renters bring a lot of business to the San Francisco Bay Area’s self storage facilities. Verna Michalski, manager at Attic Self Storage near 16th and Florida streets in San Francisco, says her facility with 1,500 units is 97% occupied.
“The majority of tenants are apartment dwellers. I’d say 80%.” she says. “Over the last few years, the big [storage operators] have come in, too, and I’d assume they’re almost as full. It happens because people who aren’t use to being here move in, even students, and bring more stuff with them than they realize they have room for. The rest of the country doesn’t realize that we have small living areas in San Francisco. They come here when they realize they don’t want to live with sporting equipment in the middle of their living room.”
Although the roughly 2.3 million people potentially moving out of the Bay Area in the coming years could help alleviate housing demand, it could also leave a large economic void in the region. For self storage operators in particular, a sudden and significant reduction in population and apartment dwellers would create a major deficit. Despite the possibility, Gullicksen and Michalski aren’t concerned.
“It’s not going to happen,” Gullicksen says. “Every year, I have clients who leave for economic reasons, but there are always more people who come along to replace them. The reason I moved to San Francisco, for example, is that there’s nowhere else to find this atmosphere.”
“More people will come and will need storage,” says Michalski. “It’s the nature of the Bay Area that you’ll always have a youthful presence here.”
Still, the Bay Area Council wants to do whatever it can to prevent such a large turnover in population. “We need to pull every lever we can to remove regional and local obstacles to creating housing, helping working families afford to live here, eliminating the scourge of traffic, and sustaining a healthy economy,” Wunderman says. “We’ve got our work cut out for us, but we’ve also got the tools, ingenuity, and creativity to do it.”