StorageMart, which operates more than 200 self-storage properties across Canada, the United Kingdom and the United States, has predicted a downturn for the Kansas City, Mo., self-storage market during the next one to three years. Though the area has brought investors healthy returns during the last decade, it’s been impacted by a “surplus of hot money” in the last two years that threatens to oversupply the region, according to a report authored by Alex Burnam, senior acquisitions analyst.
Rising income, low unemployment and an abundance of recently closed retail properties targeted for self-storage conversion are all market factors that have driven recent growth. “With new facilities continually beginning development, developers run the risk of killing the historically profitable market by oversupplying the area,” Burnam wrote.
There are 152 “institutional-quality” storage properties operating in the Kansas City metro area, comprising about 9.9 million net rentable square feet. The development pipeline includes 29 new projects set to come online this year and next. Those developments are expected to add another 2.95 million rentable square feet, an increase of 29.8 percent, according to the report.
An abundance of supply coupled with rising wages and property taxes will all cut into self-storage profitability, according to Burnam. “Significant surges of new supply competing with existing product hurt any property sector, and with wages and property taxes growing, owners are realizing smaller margins than anticipated and recorded in prior years,” he said. “If [developers] want to be profitable in the long run, they will plan for longer lease-up periods, stagnant/negative rent growth, and lower stabilized occupancy rates.”
Founded in 1999 and based in Columbia, Mo., StorageMart is privately owned and operated by the Burnam Family, which has been in the storage industry for three generations. Its portfolio consists of more than 16 million square feet of storage. It serves more than 75,000 self-storage customers, and operates in Chinese, English, Punjabi, Quebecois French and Spanish.
PRWeb, Dark Times Ahead for Kansas City’s Self-Storage Industry