5 Strategies for Selling a Self-Storage Facility to Today’s Extra-Cautious Buyers

The self-storage real estate market underwent notable change in 2023. In particular, buyers turned increasingly cautious given certain macro conditions. There’s a perception that the U.S. housing slowdown portends weaker demand. There’s also concern that inflation puts additional pressure on consumers in the form of rising property taxes, energy costs, insurance premiums, student-loan payments, etc.

Interest rates are starting to come down, and cautious sentiment is beginning to give way to cautious optimism that a boost in the housing sector is coming in 2024 and will reinvigorate self-storage demand. However, sellers who wish to navigate these waters successfully must still make a tactical shift. If you’re contemplating a sale, it’s important to recognize the generally risk-averse market pulse and flight to quality. The following strategies will help you reach your financial goals.

1. Maximize the Property Before Going to Market

Put your best foot forward and make your self-storage facility more attractive to potential buyers. First, look at occupancy and consider a focused effort to increase it. For newer properties, this means lease-up to achieve full stabilization. Likewise, keep moving rental rates to align with the market and make sure you aren’t leaving value behind. Raising in-place rents should be a top strategy.

2. Understand Property Value and Take Your Best Shot

Once you’ve done what you can to maximize the value of your self-storage property, take another look at your financials before you go to market. Is there anything you can do to strengthen them? Can you make the business seem higher-quality with less risk in the eyes of the buyer? Consider your location and other market factors, too.

An accurate valuation that stands up to buyer scrutiny can make or break a self-storage deal. Thankfully, there’s still good competition for solid, well-stabilized facilities in markets where occupancy rates have held strong.

3. Set (and Have) Realistic Expectations

The self-storage market isn’t currently at a price-per-square-foot, record-level high, so the sellers who are coming forward now have other motivations. They might be nearing retirement or moving forward in estate planning. They could be a developer who wants to realize their returns quicker and gain liquidity to fund new opportunities. Scrupulous buyers know this, and transactions may take longer as every claim and representation is weighed against prevailing conditions.

Be prepared for this extended timeline and use it to your advantage by presenting the best possible case for your self-storage property. Also, establish realistic, reliable growth projections that are grounded in current market realities and not overly optimistic. This will resonate with your buyers, who are being more rigorous with pro formas. They’re seeking assurances that your projections aren’t only authentic but attainable.

4. Optimize Presentation

Given the flight to quality, there’s more attention given to self-storage properties in which capital expenditures and investments have been made to increase its long-term value. A well-cared-for and efficiently managed facility will present better. It may be time to take care of deferred maintenance!

5. Partner With an Expert Advisor

Working with a knowledgeable self-storage advisor when selling your facility is more important than ever. They not only know how to navigate the complexities of a transaction, they can foster buyer trust through proper presentation and by emphasizing elements that add value.

Perseverance and Trust

Selling self-storage in the current environment is the antithesis of fast and easy. It’s about endurance and relationship-building. It’s about earning buyer trust in your property’s financial metrics and long-term value. This involves outstanding preparation, presentation and representation to shine a spotlight on every aspect of the site that may influence the buying decision.

There’s also a silver lining. With less inventory on the market, self-storage properties that do go up for sale tend to attract a larger pool of buyers, so there are still deals with multiple bidders. While today’s acquirers come with air of caution, there’s an opportunity to win the day with a sales process of detailed disclosures and a demonstration of value that positively impacts the immediate transaction and future asset performance.

Self-storage owners looking to sell in today's market must adopt a multi-pronged strategy. This involves working toward full stabilization and setting realistic projections, understanding asset value, ensuring the property is in top form physically and operationally, and engaging the right advisors to guide you through the process.

Scott Schoettlin is managing director for SkyView Advisors, a Tampa, Florida-based real estate brokerage that specializes in self-storage. Scott strives to help sellers maximize their property value. He has more than 20 years of experience advising high-net-worth individuals and consulting with many large and mid-sized companies to help them realize attractive returns on their investments. To reach him, call 813.829.1248 or email [email protected].