Self Storage University Podcast: Episode 36

The Changing American Investment Map

The U.S. is always changing and growing, and smart investors try to stay current on the macro trends. In this Self-Storage University podcast, we take a look at current stats on economic vitality state-by-state, and try to draw conclusions from this data. As we will discuss, there has never been more volatility as “hot” markets cool and cool markets ignite. The key to making money is to invest in areas with strong futures, and understanding how America can have an impact on those decisions.

Episode 36: The Changing American Investment Map Transcript

One thing I've learned in 60 years is that change is inevitable. Things are always, always transforming and morphing, very nimble to be on the top of your game. You have to make sure you're watching for those trends so you can make shifts yourself to be on the right side of it all. This is Frank Rolfe, the Self Storage University podcast. We're going to talk about the changing American map.

What do I mean by that? Well, I mean that things are changing. Some states that were so well thought of are suddenly not quite as well off as they once were. And other states that were really off the chart as far as people didn't even take them seriously economically, are suddenly coming back with a vengeance. So I took a map of the most recent stats based on economic health of all 50 American states. I thought we'd review that and make some observations.

In the number one spot, number one as far as economic health right now is Idaho. Wait a minute, Idaho where they make the potatoes, can that be? Yes, it is. That is where you will find the strongest economy right now is in all places Idaho. Number two came in at Utah. Again, a nice state, but not one that we think about all the time has been just a hotbed of economic activity, but yet it is. The third is South Dakota. South Dakota. Wow. Who would have dreamed South Dakota would have the third strongest most vital state economy? Well, probably not me. Then Nebraska. Nebraska, a state that most investors overlook enormously, don't realize Nebraska. We've known about Nebraska for over a decade, big fans of Nebraska. And now finally, people are seeing the light that Nebraska has a tremendous economy. Unemployment in Nebraska is far, far lower than the rest of the US after the Great Recession.

Now these next are going to blow people away. They're going to say, wait a minute, this must be flawed. There's no way. Tennessee is in the fifth spot. Why would Tennessee be there? Number one huge boom in Nashville, but also in areas beyond Nashville, Tennessee has done a tremendous job of attracting automobile manufacturing and other major manufacturing. Following that Montana. Now Montana, wide open spaces, but we don't think of that as an economic pile driver. Right? I don't recall most people say "oh, well, one day I would open my factory in Montana" but yet they are in abundance. Next is North Dakota in the number seven spot. You know I think of North Dakota is an oil and gas market. I don't think it really is an economic driver but yet it is. Arizona is in eighth Okay. Well, I can see that. Arizona has been on the map for quite some time. Arizona we have a lot of people drifting from California a little bit to the east. It's got a lot of boom as far as retirees and people so I could I can see Arizona.

This next one's a shocker Georgia, the entire state of Georgia. We're not talking just Atlanta here, although Atlanta definitely helped the stats. But Georgia, which is not thought of as being really that strong economically is now in the ninth position, so it's in the upper 20%. Then you have Virginia Okay, Virginia, it's not a state I know a whole lot about but you see quite a bit of Virginia here and there on things so I could see Virginia, being in there. That one I don't find too terribly shocking. But this next one will certainly knock you off your seat: Kansas. Kansas, we're talking places like Wichita, Kansas, Kansas City, Kansas, suddenly becoming very, very powerful economically. Lots of job creation going on there. Lots of job formation going on there. And many people would say, well, gosh, I've never even thought about Kansas as a place to own a self storage facility. So if that's your opinion, I would tend to agree with you. I never thought of Kansas as being that strong either, but yet, there you have it.

The next one is North Carolina. Now, again, North Carolina is a nice state, pretty state. But I don't think of that or didn't used to think of that as being a hotbed of the economy. But again, things have changed. The next one is Iowa. We've always been big fans of Iowa. Iowa had among the lowest unemployment after the Great Recession. It was down in the 3% when America was up in the 10s. So Iowa yeah, I can believe that. In the 14 spot New Hampshire. No, I don't really think of New Hampshire much at all be honest with you is not really a state that I ever really contemplate much going on there one way or the other. But again, the whole point of this is that states that didn't used to be on the radar suddenly becoming popular. Then you have Washington State, okay, I can see Washington state it does make the media frequently. Lots of things going on there so I can see how Washington state would be a spot that you know, would have some things going on.

But this next one just blew me away Arkansas in the 16th position. Arkansas, we're talking Little Rock, Fayetteville, Hot Springs. I can't name a lot going on in Arkansas. But yet, it's in the top half of America right now as far as economic vitality. This next one's a shocker, Alabama. Not that many decades ago, people wouldn't even make loans in Alabama. They wouldn't even look at buying the storage facility in Alabama because it was considered to be behind most of the other states economically. People were thought to not have much disposable income in Alabama. But how did Alabama do it? How do they turn themselves around like that? Well, very, very easy. They did it through attracting large manufacturing, and it's paid off for them handsomely.

Next you have Colorado. Okay, well, I would have thought Colorado would be in the top half so I'm in no way shocked that that Colorado made the lineup. Now, you know, Colorado has a lot going on there. Denver is obviously a very large, diverse market with lots of employment. So that one's not a shocker. Next one, though is. Minnesota in the 19th position. Now, you know, Minnesota is a beautiful state, very, very cold in the winter. But again, I never really thought of Minnesota as a hotbed of economic activity, be it, it is. Florida is in the 20th position. And right off the bat, you'll say wait a minute, how in the world did Minnesota get ahead of Florida, but yet it did. So based on just economic vitality information, Florida is in the 20th. It's still in the upper half, but not nearly as high rankings I think most people would have thought.

This next one is in my own home state of Missouri. Missouri is doing very, very well right now economically, it came into the 21st position. St. Louis, Kansas City, Branson, Jefferson City, Springfield, cities that people don't really put a lot of store and yet they're all performing extremely well right now. And that's much to the shock of a lot of investors who don't really think much about it. South Carolina is on the 22nd position. Charleston's a wonderful town, lots of things going on in South Carolina, and that's proven to be true, and it's still in the upper half of market. So that's an impressive display for South Carolina.

Next, 23rd position Texas, I thought it would have scored much higher than that. But I guess Texas has not got quite as much economic vitality as it did in the olden days. But still it's in the upper half and it's a very, very large state. So for it to be on there means you've got a lot of a lot of amazing things counterbalancing most of the southern part of the state and the western part of the state where you don't see a whole lot of activity. Then you have Wisconsin, I think that's the land where they we're talking about cheese, right? Beautiful area, go to Wisconsin all the time, but it's not again a place investors thought "Wow, that is where I want to put my investment dollars. I'm going to go to Wisconsin." Next, Indiana, again, a state that's a flyover state, most people never give it the time of day. Those are the top half of America right there. Those are the top 25.

So now let's go to the 25 worst. Number one, District of Columbia. I can see that. Every image I have in my mind to the District of Columbia, none of it's any good. It hasn't done well the last year or so as far as anything we see in the news and it's not an area I think of really much economic vitality other than the government and government spending. So I don't see that is really a place that I would have imagined as being strong. So I'm not really shocked. Next you have Wyoming. Again, Wyoming is a state is mostly barren. Most people are going to Wyoming to vacation, to go to a dude ranch, to soak up nature. Not really an economic powerhouse I think in anyone's opinion so I would not have considered that to be an important one anyway.

Next, Maine again a very, very small state. Not a lot going on there. LL Bean and the lobster is good. But you know, I couldn't believe it would be in the lower half. That one doesn't come as a shocker. Oklahoma. Now I thought Oklahoma would fare better but I guess apparently maybe oil and gas issues have driven it down a tad. Not really sure why it didn't make the top half. But at least if it didn't make the top half it's not that far off in the 29th position. So not an embarrassing showing I think based on anyone's opinions but again, I would have thought it would have done better.

Then you have Oregon, Oregon in the 30th position. So a little, it's in the bottom half. Still near the top end of the top bottom half. But again, we've all seen over this past year, all kinds of negative publicity on Oregon. This next one is again, not a shocker to me based on my own opinions of how the world is changing. Maryland in the 31st position. So Maryland, you know, has fallen dramatically as far as economic provenance over time. Delaware 32nd position. Again, not a very strong showing, but not a state that came as a total shock to me because I don't really think of much of Delaware to begin with.

Then Vermont, wow, Vermont I think of maple syrup, and not much else. A little bit of a travel hub but I didn't expect much from Vermont, so wasn't very shocked when it came in the 33rd position. Massachusetts, Okay, wow, that one hurts. So in the 34th position, you have Massachusetts, land of MIT and a whole lot of technology. What happened here? The bloom is off the rose here, this was typically a technology and healthcare hub. And suddenly it's plunging in the ratings down to 34th as far as economic vitality, and that was kind of a shocker, I did not expect it to fare so poorly. But again, you know, the world is changing, the map is changing dramatically, and that's what happens.

The 35th position Michigan, we all know what drags it down. It's always been Detroit. It's been in the dumpster forever because of Detroit. It's really sad because Western Michigan is beautiful, and you'll see some of the nicest developments, residential areas and things you've ever seen on the western side of Michigan. But again, it's Detroit that puts it into an endless tailspin, along with Flint and some other suburbs that have just contributed not a whole lot economically to try and move them up the chart. So I was in no way shocked that they would come in at that position. Next Mississippi, again, not a shocker, Mississippi has just had a terrible time ever getting its act together economically. Actually, that's a really good showing for them. I think last time around, they did one of these studies that came in 43rd. So it's actually moving up the ladder. But it started off so bad, that it's going to take a whole lot more for Mississippi, as far as pulling up their economy by its bootstraps to get it back up into a net level similar to a lot of those other southeastern markets, which we will talk about in a minute.

Next is Kentucky. Again, Kentucky there's Louisville but you know, there's again, not a lot goes on in Kentucky, we don't hear a lot about Kentucky. So 37th position, that one again does not come as an enormous shock to me. Ohio in 38th position again, I'm not really shocked, it's considered a lot of times is more of a rust belt state. So it's not one that I expected a whole lot better than that ranking. But at the same time, there are some good things going on. If you haven't been to Louisville in a while, you'll see it's really transformed itself as a downtown area, a lot of things going on around it. Rhode Island and 39th position. It's a very, very small state so that one does not really shock me. West Virginia came in at 40th that's, you know, its main product is coal. As we all know, coal has not been a great area to have your economy based on in recent times. So that one again doesn't really blow me away as something that is fully unexpected.

So next is Pennsylvania. Okay, that's a bit of a shocker. Pennsylvania used to rank really, really well. At one time on these on these kinds of analysis that came in the 19th position. But apparently things that made Pennsylvania tick in the past which is predominantly education, there's healthcare, other private industry there, it's not doing what it is always done, it's starting to decline. And you know, that's just the way the world works. It's always, always in a state of flux.

This next one I think we would all agree is horrifying. California is in the 42nd position. So it's in the bottom 10, so the bottom 20th percent of the United States based on economic vitality. Okay, that is a big problem. For California to come in that bad that really hurts America as a whole. Because America needs the support of those really, really large states. And here you have California based on landmass, perhaps our largest state or close to, not really sure between California and Texas who wins but wow, terrible showing in that in that position. And the next one is just as shocking, Nevada. I remember when Nevada was considered one of the hottest states. Everyone wanted to invest in Nevada, right? You had Las Vegas paving the way and the casinos and all that. And, wow, not good.

Hawaii came in and 44th position. That's a terrible showing. Of course, a lot of people don't really think much about investing in Hawaii anyway. It's separated by a giant ocean from the rest of America. And it's not a place that I personally know, I know one person who does self storage in Hawaii. But that's not an area that we all typically think of as a "I'm going to go buy storage in Hawaii." So that one, not a complete and total shock. And then you have Alaska and the 45th position. Alaska, again, is not an area that that most people are really thinking in oil and gas, as we all know, has not done well in recent times. So that one doesn't come as big shock.

Now this next one is again horrifying, New Jersey 46th position. Wow. At one time, it was ranked as high as 12th and now it's down to 46. That is a horrendous fall from grace. What happened in New Jersey? Basically a lot of blight. I remember back when they had Atlantic City was going to be going strong. And people were all excited about the possibilities, and it was performing well, and no not today. This next one is truly horrifying for those who can think back decades and that is New York. New York came in in 47th position, the third worst, as far as economic vitality in the United States. I remember back when people considered it near the tops. I'm sure there are people listening to this who have one of those old, "I love New York" t shirts. But unfortunately, economically, people don't love it much anymore.

The 48th position, again an absolute shocker, Illinois. Illinois used to be one of the top 10 states in the US. Chicago is the second largest city in America. But it isn't helping the state out much it coming in just two from the bottom, which you kind of think here New York was the number one city and it's three from the bottom. So maybe those large city markets are, are not necessarily where things are at anymore. And that, again, is a shocker because we used to put so much emphasis on that investment wise that we thought well, you know, New York and those large cities like Chicago, they will always, always do well. But alas, we were wrong.

Next New Mexico doesn't really come as a shock. New Mexico has always been one of the worst economies in the United States. Year over year, it always ranks very, very poorly. I think it's because there's not a lot there. You have Albuquerque and then you have Santa Fe, but none of these markets are very, very large. So as a result, there's just not enough power there to power up the rest of the state. And then the 50th position is Connecticut. Connecticut again, because of its proximity to New Jersey, New York, which scored so very poorly, I guess it dragged it down two.

Now what do we learn from the stats I just gave you? Let's just make some macro observations. Number one, things have changed dramatically. So those states that used to be hot, those coastal states, they're not. People talk all the time putting down what they call the flyover states. Well, I would much rather invest in those flyover states than either of the coasts all day long. Statistically, there's nothing to support the argument that those flyover states are lesser states economically, in fact, those flyover states are far superior economically just based on the stats I just gave you. And in fact, none of these stats I believe, should be hard for people to believe because we all really know this, we see this going on.

Also note that most of the areas that are doing well are what they call red states. The red states are really showing provenance, it's not hard to guess why. They have much less bureaucratic control so the economies there are not throttled back, they're allowed to grow as large and as fast as they as they want to go. Also, it's important to note that in all of those top performing states, you have a whole lot of solid, smaller markets, not just one big key driving market. Unlike New York and Chicago which used to carry their states, the states that score well now are highly diversified. They don't have just one big city in them. They have a lot of solid, but yet smaller metros. That's good for storage investors because that means there's more opportunity. There's more storage facilities, things are spread out much more, makes it much easier to find a deal to buy.

Most importantly is a simple observation that things in America have changed very, very, very dramatically. They will never go back to how they were before. It took decades for things to change, and it takes decades for things to change back. Now, I don't believe if we review this list another five or 10 years from now than any of these things will be in the same positions. Maybe a few will, but again, that's the way investing goes. There's a time to buy, there's a time to sell, there's time to invest in something and there's time to get out.

Now, when you're looking at states to buy in to invest in for that self storage facility again, the states that have the stronger economic vitality typically will perform better for you. Don't for a minute think this is set in stone. Always stay nimble. Always stay on the cutting edge. Always ponder what's going on in my state, study it, understand it. When you invest in a self storage facility, you're really investing also in that larger macro area. It's very important that you choose winners, you avoid losers, but you always stay abreast of exactly what's going on to make those right timing moves. This is Frank Rolfe the Self Storage University podcast. Hope you enjoyed this. Talk to you again soon.