Uncorking Niche Investments: An Intro to Wine Storage

Wine storage takes up less space, yet rents at MORE THAN DOUBLE the average self storage rate.

The smallest wine unit (2.5x2x1 ft.) could start at $19 monthly in California, putting the per cubic feet rental income in the $1.90 to $3.80 range. By comparison, the smallest 5x5 class A self storage unit in L.A. could reach about $90 monthly, putting the per cubic feet income between $0.40 and $0.65. A 5x5 wine room equivalent could rent in the $200s-$400s each month.

Pricing does vary by location and amenities, but overall, the wine market generates about $57 billion in revenue and is expected to grow annually by 5.85% (2023 forecast). Self storage industry numbers are not that far off.

If you like to invest in wine, it’s time to consider investing in wine storage. If you’re looking to passively invest in opportunities with relatively high returns and long-term growth, self storage should already be a part of your portfolio.

Wine storage and self storage facilities don’t need to be stand-alone, and in fact pair quite well together. Most of the time, dedicating a section for wine storage within an existing self storage plan seems to pencil better. Sometimes, leasing retail space for wine storage may be a viable option. Whatever structure you choose, understanding the differences will be necessary:

Wine Storage vs Self-Storage: Key Differences

Aside from the most prominent difference in rent rates mentioned above, let’s talk purpose and basic requirements: The primary purpose of a self-storage facility is to provide secure storage for a variety of items, a wine storage facility focuses on offering secure storage specifically designed to store and age wine.

Providing a cool, consistent, humidity-controlled, vibration-controlled, and lighting-controlled climate, with temperatures around 54°F to 55°F at all times is the standard for wine storage. Comparatively, the typical climate-controlled self storage facility is kept between 55°F and 78° F, with much broader standards.

Tenant Base

Wine storage facilities cater to a specific tenant base of wine collectors and connoisseurs looking to ensure excellent provenance and protect the wine’s value. Self-storage facilities serve a broader range of individuals and businesses.

Lease Terms

Those who invest in wine know that it’s not typically a fast turnaround investment, and can take 6-10 years to see a return. They are more likely to sign up for annual leases. Even the temporary wine tenants looking to build their own private storage tend to need at least a year to move their wines out. Self-storage leases are usually shorter-term, leasing on a month-to-month basis. Since wine storage’s tenant base holds longer-term leases with lower tenant turnover, this results in potentially even more stable, long-term, cash flows for investors.

Build Out Cost

Although wine storage generates higher rental income per square foot than self-storage, it also incurs higher build-out costs (we will elaborate in future posts, let us know if we should prioritize it). Expect to budget about $35-$65 per SF for wine - compared to $20-$40 per SF for climate controlled self storage - on the interior. Numbers vary by location, materials sourced, inflation, etc.

Property Management

Operating a wine storage facility requires additional specialized knowledge, including case counts, inventory tracking, and handling transportation of valuable wine. Some facilities like to hire sommeliers to manage wine storage rentals to elevate their brand. Also, providing wine storage often goes hand-in-hand with hosting wine-related events in common areas within the facility for community building.

Market Factors

Wine investments have delivered 13.6% annualized returns over the past 15 years, making it a relatively stable investment. Wine storage, by relation, follows a similar trajectory.

The leading consumers of wine worldwide starting in 2020 was not France, but USA. Conveniently for us, California is the leader in wine consumption by State, while also producing 86% of the nation’s supply. The self-storage industry simultaneously started witnessing a rapidly growing demand for wine storage since then.

COVID certainly boosted wine sales, then drove more visitors to vineyards once things reopened. Meanwhile, environmental and supply chain factors have recently put a damper on wine production forecasts, which may drive wine prices, investments, and demand for wine storage even higher.

Interested in Wne Storage as an Investment?

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