The long-term outlook for the nation’s self-storage market remains positive, despite the current global current economic crisis. Overall, the commercial real estate sector faces many challenges as cap rates rise, the market for fully occupied properties shrinks and acquiring financing becomes more difficult. Investor confidence in commercial real estate continues to wane as the economy moves further toward a recession.
During this time of uncertainty, sellers and investors require more information on the state of the self-storage investment market and more personalized client service. Today’s biggest challenges for self-storage investment specialists are acquiring financing for transactions and moderating sellers’ expectations based on actual demand.
In this tumultuous market, utilizing the services of an experienced, third-party intermediary is more vital than ever. Acquiring qualified buyers for self-storage properties has become more difficult as buyers have become much more selective. Buyers are scrutinizing every deal; the slightest mistake in underwriting will lead to deals collapsing. The fact is its more challenging to get deals to the closing table, increasing the value of self-storage specialists.
There are several key components to closing a self-storage transaction in today’s economic environment. The underwriting must be based on actual net operation income (NOI), with absolute transparency in the deal. Also, the self-storage property must be priced and positioned properly in its submarket. The buyer should be selected not only because he makes the highest offer on the property, but also because he has the ability to close. The buyer should possess equity, a banking relationship and experience to operate self-storage facilities.
Some self-storage sellers may want to sell their properties themselves to save on broker fees; however, what those sellers save in broker fees they will most likely lose at the bargaining table. A qualified broker offers a client local market expertise with a national marketing platform and perspective, matching every property with the right investor.
Brokers should be excellent marketers since marketing plays a larger role in this current real estate climate. A broker has to demonstrate why a potential investor should acquire the property by revealing the property’s upside. When looking out for their clients’ best interest, brokers must also be excellent negotiators, possessing the ability to cut through the red tape to get both the seller and the buyer to agree to work toward closing.