Self Storage

Self Storage News

Co-authored by: Nick Malagisi, SIOR/National Director of Self Storage for Sperry Van Ness Commercial Realty and                                            Hans Hardisty, MBA, Advisor, Sperry Van Ness Deegan-Collins Commercial Associates

SVN LOGO

 

Seasoned veterans of the self storage industry often refer to the original three (3) “Ds” of self storage customer demand as death, divorce and (natural) disasters. However, since the industry’s infancy, the American public has found more ways to use self storage than the pioneers ever imagined.

As occupancies have risen to unparalleled levels over the past 3+ years so too have rental rates. Self storage is an income producing asset. As commercial real estate advisors/brokers, we observe the values of these self storage assets continue to rise. Revenue incomes have increased and cap rates have compressed. Additionally, as long term interest rates remain at historic lows and the Federal Reserve’s decision to further delay a jump in short term interest rates, cap rates remain in the single digits and facility values are increasing.

Owners with expiring 5-7-10 year term loans on existing properties are able to refinance at lower rates. With lenders offering lower Loan to Value ratios, owners can either take tax-free money out of the refinancing to acquire/develop another project, or they can choose to sell their facility at record high prices. Both options are possible for owners who may only have been in the business for a generation or two. Still others are choosing to go forward with new projects. We are seeing several developers who acquire the land, secure approvals, permits and plans, build the facility and sell to an operator at Certificate of Occupancy. Record prices have been paid for properties with 0% occupancy.

The developer takes the permitting and construction risk and the experienced operator takes on the lease up risk to achieve stabilization. Last year several of our clients recognized that they were in a position to achieve “Optimum Value” for their facility. Due to a convergence of factors in the economy and the capital markets a “perfect storm” exists for owners to attain unprecedented values for their properties.

On the other hand, certain independent “mom & pop”-owned facilities are not participating in this economic resurgence. Perhaps their facilities are located in secondary markets where the competition can be two or more national/public REIT-owned facilities. These larger companies can, and do, spend millions on internet resources including expensive SEO, algorithms and in-house departments whose job is to get their company to the top of a Google Search. The internet, for the smaller independent operators, is not the great equalizer. They struggle to compete with economies of scale enjoyed by their larger competitors. In addition, as new development projects sprout up in urban, suburban and rural markets the older independent facilities must now compete with new facilities with customer-centric amenities and the inevitable and enticingly low introductory rental rates.

So the question is: Have you reached the “Optimum Value” for your self storage asset? We encourage you to have a trusted real estate advisor who specializes in self storage help you determine the Market Value of your facility. A ‘Confidential Broker Opinion of Value’ will help you make an intelligent, informed decision for yourself and your estate at this very exciting time in our industry.

 

Poughkeepsie Office


SVN Deegan-Collins Commercial Realty
2656 South Road, Suite C
Poughkeepsie, NY 12601

OFFICE (845) 214-0280

Kingston Office


SVN Deegan-Collins Commercial Realty
411 Washington Ave., Suite 201
Kingston, NY 12401

OFFICE (845) 339-9100