One of my clients is concerned about the level of new development and predicts Austin could be overbuilt within two years if entitled projects are all built. San Antonio markets are seeing good growth as well, particularly in the north, northwest and northeast suburban markets. Occupancies at class-A and -B facilities are very strong, and a number of new projects are under way or in the planning stage. Most of the growth is coming from strong local operators/developers and regional players, though there’s strong interest by large national players for denser submarkets that meet their acquisition requirements.
Goldman: The best risk-adjusted opportunity for storage is under-managed facilities with room for expansion. Over the past 18 months, I’ve seen some remarkable success stories in Arkansas, Kansas and Missouri. I can think of several lease-up situations where the buyers have driven occupancies up from well below 50 percent to more than 80 percent in less than a year, generally by exercising simple yet disciplined steps.
Jones: The Oklahoma unemployment rate is 5.2 percent, well below the national average of 7.4 percent. The state has seen single-family residential permitting up 37 percent in June 2013 from 2012. We’ve seen significant demand in the Oklahoma City metro area from contractors working on large oil and gas projects, along with a trickledown effect from the Moore tornado, which destroyed 1,150 homes. In Oklahoma City, there are several new projects and big-box conversions under way, which should help satisfy some of the demand from these forces. The Tulsa metro, historically seen by most outside investors as overbuilt, is stabilized based on the latest market survey. We’ve seen one new project, some expansions and a new conversion since the beginning of 2013.
LaGroue: Within the south-central region, there are a few markets that present a good outlook from a development standpoint. For example, there are some pockets within the Jackson, Miss., market that are under served, and opportunity exists for development. We have such an opportunity in Brandon, Miss., whereby the facility has already been designed and approved. Currently, the city will not allow any more development of self-storage facilities, which makes this opportunity really attractive for someone to come in and build, knowing there are barriers to entry in place for other competitors.
Several cities and towns are still catching up with the supply that was developed prior to the recession, and it will take some time for things to stabilize. In some areas, specifically the secondary and tertiary markets, some pent-up demand does exist; however, each individual market needs to be studied carefully. Existing facilities have continued to stabilize and, in some instances, have begun expansion projects that had previously been put on hold over the last several years. As the economy continues to improve, we’ll continue to see expansions of existing facilities as well as some new projects take shape in Alabama, Louisiana and Mississippi.
Trahant: Most of the growth in the Dallas/Fort Worth area is occurring in the northern portion of the metroplex areas. For example, Collin and Denton Counties have seen a population explosion over the past decade, and the urban sprawl has continued. As the residential market continues to improve in the area and new-home construction is rebounding, we expect to see additional self-storage development in these previously smaller markets.
What types of buyers are dominating purchases in your area (REITs, large operators, local owners, etc.)?
Barnhill: The REITs and large operators are predominant buyers in the higher-population demographic areas in Alabama, Louisiana and Mississippi, whereas small operators tend to represent the predominant buyers in secondary and tertiary markets.