While no one has predicted that the next self-storage building boom will approach the fever pitch of new builds during the 1990s, numerous indicators suggest operators and new investors are currently bullish on development through ground-up construction and facility expansion. The next boom may already have begun.

Teri Lanza

August 23, 2013

4 Min Read
Has the Next Self-Storage Building Boom Already Begun?

Tony Jones***A guest installment by Tony Jones, Manager, Inside Self-Storage Store

For months now, many longtime self-storage professionals have been saying the industry is on the cusp of another development run. While no one expects the next building boom to approach the fever pitch of new builds during the 1990s, numerous indicators suggest operators and new investors are currently bullish on development through ground-up construction and facility expansion. The next boom may already have begun.

In the ISS 2013 Top-Operators List, set to be released next month, participating companies have not been shy about pledging plenty of anticipated growth during the next couple of years. While this is not surprising when it comes to the sectors largest operators, including the real estate investment trusts (REITs), the boldness of the plans outlined by many operators in the bottom 50 are eye-opening. These include self-storage businesses with 10 facilities and fewer that do not offer third-party management services. Several operators that did not make this years top 100 also indicated immediate plans to grow by way of acquisition, new development and facility expansion.

Since we launched the ISS Store last year, it has been interesting to gauge the research activity of investors, developers and operators from their data-report purchases through our partnership with the Self Storage Industry Group of commercial real estate firm Cushman & Wakefield (C&W). In the last few weeks, we have seen a noticeable uptick in orders from those mining for data in the nations 50 largest metropolitan statistical areas (MSAs). The quarterly MSA reports contain information regarding income, expenses, occupancy, supply, asking rental rates, concessions, and rent per available square foot within a specific MSA. Each one-page report includes an overview of market conditions, self-storage performance index, asking rental rates by unit type, rent per available square foot, physical occupancy, and more.

In addition, there has also been an increase in orders for Trade Area Snapshot Reports. These custom reports are produced on demand by C&W and highlight data for a three-mile radius around the specific address for an existing facility or prospective site. They provide metrics on trade-area market conditions and highlight most of the same data categories contained in the broader MSA reports.

Both types of reports should be part of any due-diligence research in preparation for a new development or facility expansion.

If one considers the continued strong financial performance of the four publicly traded U.S. REITs individually and as a group, its no surprise investors and developers have sharpened their focus on the sector. Although banks continue to be cautious with funding, financial analysts also have noted lenders are willing to open their coffers to trusted and proven clients.

To assist developers, investors and growing operators in properly preparing for development projects and business transactions, the ISS Store this week released 11 audiocasts featuring building and investor education sessions from the 2013 Inside Self-Storage World Expo. Each package contains an MP3 audio file of the featured session, along with a PDF of the matching presentation slides provided by the speaker.

Whether youre trying to navigate your financial options, figure out whether to buy or build, or research investment trends across major self-storage markets, the investor-related audiocasts provide outstanding insight into the market from leading industry experts. Likewise, the building-based sessions cover topics like the real cost of construction, implementing successful facility design, concerns with retrofitting an existing property to self-storage, and others.

As industry consolidation continues, many investment and development projects will involve reviving distressed properties. Further, even operators that are not in the market to add new locations likely will be forced to do more with the footprint they already have and build profit through innovative facility expansion. Let us know about some of the self-storage development activity youre witnessing in your area, along with any expansion plans you foresee for your operation, in the comments section below.

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