Self-Storage Real Estate Outlook: The North-Central States

Michael L. McCune Comments
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Goldman: In Western Missouri and Kansas, the slowdown of new development due to stricter loan underwriting and sky-rocketing construction costs are boosting occupancies, and rent concessions are being reduced in those facilities. Other demand factors—such as the relocation of families that have lost homes, fewer people buying homes and other recession-driven issues—are boosting demand.

Jordan: I’m unable to determine significant changes regarding rent concessions, since demand for self-storage is more driven by life events than by business cycle. In Minneapolis, good, consistent marketing is more effective than rent concessions.

Hitler: The majority of owners at a recent Wisconsin Storage Association meeting thought business was good if not better than a year ago, and they had raised prices. This market has remained strong despite the economic downturn.

Randklev: Location still remains one of the most important factors as renters will be within 20 to 30 minutes of a facility. We are not seeing any rent concessions or incentives.

Smith: In Nebraska, we don’t have a lot of concessions driving self-storage rentals; it is pretty much business as usual.

Are the big buyers, multi-facility operators, dominating purchases in your market?

Bahrmasel: They seem to be the more active purchasers today. Perhaps this is because 1031 money has become nearly non-existent and, therefore, buyers who are migrating into the storage business from other areas of the real estate market have fallen off. Buyers now are trying to fit acquisitions into their plans rather than having to compete with market newcomers.

Goldman: While there is increasing consolidation among the multi-site owners, 1031 buyers trading out of other property types are still the most active.

Hitler: Wisconsin does not have many multi-facility owners based out of state. Buyers here may have more than one facility but are small in comparison to a national-based operation.

Jordan: The big buyers continue to dominate purchases in the Twin City and metro area markets.

Randklev: There haven’t been enough sales in our market to answer this question but we are a tier-six market, so there aren’t many big buyers to dominate.

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