Self-Storage Real Estate in the South-Central States: Occupancy Rises as Facilities Fill Up

By Ben Vestal Comments
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A strong housing market in many of the south-central states is giving self-storage operators an uptick in rental activity and enabling them to enact higher rental rates. In addition, many of these markets may be ripe for expansion as pent-up demand is at last being met. In this roundtable, industry real estate experts discuss trends in the south-central states, including current rental rates, the strongest markets across the region, and the major buyers. Participants include:

  • Bill Barnhill, Shannon Barnes and Stuart LaGroue, Omega Properties Inc., Mobile, Ala.
  • Bill Brownfield, MKP Self Storage, Houston
  • Larry Goldman, RE/MAX Commercial, Kansas City, Mo.
  • Jared Jones, Porthaven Partners, Tulsa, Okla.
  • Tyler Trahant, CASE Commercial Real Estate, Fort Worth, Texas

What are the recent rental-rate trends in your major markets? Are you seeing rates increase as the market continues to improve?

Barnes: Since our markets cover all of Alabama, Louisiana, Mississippi and Northwest Florida, the entire spectrum of rate changes is represented. The real estate investment trusts (REITs) and other larger operators have been able to make significant rental-rate increases in some markets. Generally speaking, however, only modest increases are being made by smaller operators in secondary or tertiary markets. In those areas where the economy is improving, there should be reasonable opportunities to raise rental rates.

Brownfield: My major markets include Austin, Houston and San Antonio, Texas. All three continue to see population and job-growth gains that support good growth in each local economy. Rental rates are increasing in each at steady and sometimes enviable levels. Of the three, Austin is probably seeing the highest percentage increases due to occupancies above 90 percent and greater zoning constraints, which limit new development.

Goldman: Rents and occupancy rates are improving throughout Arkansas and, really, most of this region. Residential real estate activity is making a strong comeback, and consumer confidence is vastly improving. Little Rock was recently named the No. 1 place to live by Kiplinger Personal Finance, and Northwest Arkansas has made a significant resurgence as well.

Jones: Rates in Oklahoma are moderately rising. We’ve seen rental-rate increases of 2 percent to 3 percent from most operators, with some owners seeing a 6 percent escalation. Rental-rate growth is becoming more important to preserve the operating margins of owners, as we have seen significant increases in insurance premiums within the last few years due to the insurance companies sustaining large, weather-related losses.

Trahant: In northern Texas, we’re seeing discounts slow down a bit and rates being pushed in certain markets. Of course, there are always those areas with stiff competition that will have leasing incentives present for a while to come. Occupancies in most areas are strong at this time, but this is partially due to the seasonality of the business. 

What markets in your territory present a good outlook for self-storage?

Brownfield: Houston’s housing growth is very strong in perimeter markets in all directions and particularly strong to the north and west suburbs. Housing stock is also being added to the south and east markets, so most of these are natural targets for expansion of existing facilities and new development. Inside Loop 610, thousands of new apartments are under construction, so there are selective opportunities for storage there, though land prices are much higher. Occupancy in most of Austin’s self-storage is well above 90 percent. In the northwest, west and southwest, occupancy is near 100 percent. These markets are growing in population, so self-storage growth is planned and under way.

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