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A Year for Expansion: Self-Storage in Canada 2007

Candace Watson Comments

The Canadian self-storage industry experienced a year of significant growth despite several challenges. The biggest self-storage news item one year ago was the formation of InStorage REIT, the first Canadian real estate investment trust focused on the acquisition of self-storage. In one year (August 2006 to August 2007), InStorage moved to first place in Canada in holdings of self-storage. The REIT closed on 52 stabilized properties or approximately 3 million square feet of net rentable area.

Public Storage, which has 48 locations across Canada, has been relatively active in the past year, including the purchase of a 35,000-square-foot facility comprising 300 units in Woodstock, Ontario, in May ’07. The property has additional expansion potential of 20,000 square feet or approximately 270 units. Two new facilities were opened in June 2007: an 84,000-square-foot, 947-unit four-story building in Laval, Quebec, and an 86,000-square-foot, 962-unit property in Scarborough, Ontario. In September, the company purchased 1.8 acres in Laval, Quebec (at $412,000 per acre) for the development of self-storage, and in December, the company acquired 3.3 acres in Richmond, Ontario, for $1.03 million per acre.

Since August of 2006, the Depotium portfolio in Quebec has expanded by 11 facilities to a total of 18 self-storage properties, the majority of which are on the Island of Montreal. Due to the scarcity of land in Montreal, all the Depotium facilities in the city have been developed in buildings converted to self-storage from industrial or service commercial uses. However, a new multi-level facility was opened in 2007 near Joliette in Notre-Dames-des-Prairies, and new multi-story buildings have been added to existing facilities in Montreal East and Longueuil. There are approximately 7,600 units under the Depotium brand.

Individual Markets in British Columbia

The supply of self-storage in the Vancouver Lower Mainland will reach 5.8 million square feet by the end of 2008, or about 2.4 square feet per capita. Approximately 480,000 square feet of self-storage will be added in 2008 in six new facilities and expansions to existing facilities. Two of the expansions comprise the addition of portable units rather than new construction because of rising costs. The current estimated average facility size is 55,000 square feet. An estimated 420,000 square feet was added to the supply in 2007 in four new facilities and two expansions.

Rents are stable in most areas, and portfolio managers report that rent increases are planned for spring or mid-year in most sub-markets. The range in rents is $19.80 per square foot per annum in rural areas to $34 per square foot in Vancouver. Occupancies appear to have softened somewhat from 95 percent-plus to the low 90 percent excluding facilities in lease-up.

Absorption of new facilities has slowed and significant promotions are being offered at new facilities, which are being matched by the closest competition. There have been no sales other than one small facility that sold twice in 2007.

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