The United States is experiencing a credit crunch unlike any other in recent history. Below, self-storage brokers throughout the West explore the potential impact on self-storage customers, developers, owners, buyers and sellers. Contributing to the discussion are the following real estate brokers, with my comments in italics:
- Richard Arnold, Argus Northwest Real Estate, Portland, Ore.
- Larry Hayes, Hayes & Associates, Missoula, Mont.
- David Laney, RealStar Commercial Real Estate, Albuquerque, N.M.
- Ryan Layton, American Real Estate Associates, Spokane, Wash.
- Joan Lucas, Joan Lucas Real Estate Services, Denver
What changes in occupancies, discounts and rental rates have you seen in the last six months?
Arnold: I have seen no significant changes in occupancies in the last six months in Oregon. Rental rates remain firm, and customers have not yet had to make economic choices about keeping their storage units.
Hayes: Some owners in Montana and Idaho have reduced rates or introduced new move-in promotions to improve lease-up or maintain occupancy.
Laney: The New Mexico market continues to be strong for some owners in certain locations. As consumers have been hit with rising gas prices, rural Westerners are disproportionately affected and this is having an impact on rural storage owners who now have to compete over new customers and deal with delinquent renters. The urban markets of Albuquerque, Santa Fe and Las Cruces continue to have strong performance in stable markets. The areas of newer development are seeing more rent concessions and longer rent-up periods due to competition from equal quality facilities.
Layton: In Washington, certain partially filled facilities are getting creative to lease their vacant space. Good quality facilities should not have to discount rates, but when lower class facilities begin to offer concessions it often brings the rates down for the entire market.
Lucas: In recent discussions with Colorado owners, there is a wide range of opinions on the current state of self-storage demand. Well-located properties in higher income areas still enjoy high occupancies and offer few, if any, concessions to renters. However, in some secondary markets, residential foreclosures are still on the rise and owners are reporting slower lease-ups and an increase in vacancies.
It is also interesting that many properties with a bulk of 5-by-5s and 5-by-10s are enjoying much higher occupancies while the vacancies have increased in larger units. The Denver area is seeing a decline in the number of homes for sale, which will mean an improvement in the overall economy and hopefully an upturn for self-storage operators as well.
In general, given the economic slow down, what we hear from most areas of the country is that rates are holding up remarkably well. There appears to be more discounts given to secure the tenant and the rents have not had their usual increases. It remains to be seen how the remainder of the year plays out and the impact of the election on the economy as a whole.