While nearly all businesses in the vicinity of Market Street and Van Ness Avenue in San Francisco have sold their property to make way for hundreds of housing units desired by city planners, self-storage real estate investment trust (REIT) Public Storage Inc. doesn’t appear willing to vacate its property at 99 S. Van Ness Ave, according to the source.

September 1, 2015

2 Min Read
Self-Storage REIT Public Storage Holds Out Against San Francisco Residential Land Grab

While nearly all businesses in the vicinity of Market Street and Van Ness Avenue in San Francisco have sold their property to make way for hundreds of housing units desired by city planners, self-storage real estate investment trust (REIT) Public Storage Inc. doesn’t appear willing to vacate its property at 99 S. Van Ness Ave, according to the source.

As part of the city’s 2009 Market-Octavia Plan, most properties in the area are zoned to rise as many as 120 feet and targeted for condominiums to help ease the crowded housing market, the source reported. The 61,000-square-foot Public Storage facility at the center of controversy contains four stories, but zoning would accommodate a 12-story residential high-rise.

“[Self-storage facilities] are killing grade-A real estate across the city,” Chris Foley, a principal with sales and marketing firm Polaris Pacific, told the source. “They never sell.”

Part of the REIT’s unwillingness to move likely stems from revenue it will make from new residents who move into the future condos. Public Storage currently has 127 facilities in the San Francisco area, a market that generates the company’s highest occupancy rates and second highest annual rent per square foot at $22.53, the source reported.

Similarly, fellow self-storage REIT Extra Space Storage Inc. reported 12 percent revenue growth in the San Francisco market during its second-quarter earnings call, according to the source.

“I’ve seen some outrageous deals in past deals when people were offered twice to three times what land is worth, but they still don’t sell from the REIT structure because it doesn’t make sense,” said Chris Sonne, executive managing director for the Self Storage Industry Group of real estate firm Cushman & Wakefield. “They need to make sure cash flow and operation shows growth.”

In a similar situation last year, a state agency in New York initiated eminent-domain proceedings against StorageMart, forcing the national self-storage operator to close a facility in Brooklyn, N.Y. The intent of that case was to enable the completion of a 22-acre mixed-use project designed by architect Frank Gehry, according to the source.

Elsewhere in San Francisco, City Storage recently announced a plan to develop “penthouse apartments” above its self-storage facility at 500 Indiana St. The facility is currently five stories, but the business owners want to supplement revenue by adding a sixth floor with 17 residences.

Based in Glendale, Calif., Public Storage has interests in 2,262 self-storage facilities in 38 states, with approximately 147 million net rentable square feet. Operating under the Shurgard brand name, the company also has 216 facilities in seven European countries, with approximately 11 million net rentable square feet.

Sources:

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