A Macro Look at Today’s Self-Storage Market and the Factors Affecting Occupancy, Revenue and Facility Value

By Ben Vestal Comments
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Over the last three months, the commercial mortgage-backed securities (CMBS) market, which is responsible for about 25 percent of all commercial real estate loans, has provided nearly $21 billion in new loans. This is nearly double the volume during any other stage of the current recovery. It’s also worth noting that the pricing of these loans is getting increasingly aggressive, but it’s also comforting to see the underwriting is generally conservative compared to pre-recession levels, with loan to values remaining in the 65 percent to 75 percent range.

Traditional banks are also becoming more active as commercial real estate trended upward for the better part of a year and a half. With job growth spreading beyond just the usual markets (New York, Washington, D.C., etc.), combined with the loosening credit markets, it’s safe to assume that investment sales (self-storage properties included) will continue to climb at a steady clip throughout 2013.

Enjoy the Ride

Unlike in previous years, the self-storage investment outlook is easier to spot—and it’s poised for a robust run. We’re enjoying increased occupancy, revenue and facility value. All of this is supercharged by the low interest rates and lenders that are willing to give self-storage the respect we all know it deserves.

Today, the downside risks are familiar ones, with the biggest being inflationary risk. This is followed by energy (gas) prices, the Euro crisis that seems to be creeping back into the headlines as of late, and the biggest wild card of them all, the U.S. fiscal policy. Seeing through all of the messy politics and possible downside risks mentioned above, the U.S. economy will grow between 2 percent and 2.5 percent in 2013, enough to create 1.9 million new jobs and assist the commercial real estate markets, including self-storage, in making significant strides—assuming the economy will have no external shocks or self-inflicted wounds.

Ben Vestal is president of the Argus Self Storage Sales Network, a national network of real estate brokers who specialize in self-storage. Argus provides brokerage, consulting and marketing services to self storage buyers and sellers and operates SelfStorage.com, a marketing medium and information resource for facility owners. For more information, call 800.55.STORE; e-mail bvestal@argus-realestate.com. To learn more about cost segregation and accelerated depreciation, visit www.argus-selfstorage.com .

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