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Development Hiatus Proves Positive for Houston Self-Storage Businesses

October 22, 2019

2 Min Read
Development Hiatus Proves Positive for Houston Self-Storage Businesses

Self-storage rental rates in Houston have increased 2.3 percent thus far this year, after declining more than 10 percent in the last two years. The uptick has coincided with a slowdown in facility development, reducing the amount of new rental space coming online. Developers have added 1.3 million square feet of storage this year, a steep decline from around 3.8 million square feet in 2018, according to the source.

“Construction has definitely veered off. It is slowing down, and yet it’s healthy,” said Dave Knobler, first vice president of Marcus & Millichap (M&M), a commercial real estate investment services firm with offices throughout Canada and the United States. “For the greater good of the storage operators, a slowdown in development is probably a good thing by exercising a little caution.”

The drop in new construction is in stark contrast to the previous two years, in which developers added a total of 6.7 million square feet into the market. Houston began this year with 68.4 million square feet of rentable storage, approximately 9.5 square feet per capita.

The shift in market dynamics has made Houston a hot real estate market, with property buyers outnumbering sellers. Knobler is on pace to finish the year with $75 million in self-storage transactional volume, he told the source.

Outlook for the Houston self-storage market is positive, buoyed by steady employment growth and new residents. Approximately 110,000 jobs are expected to be added by year-end, while population growth is on pace to top 60,000 people for the second consecutive year, according to the source.

“The good news for the Texas self-storage industry is that we’re still adding jobs and people,” said Steve Mellon, managing director of the national self-storage team for JLL Capital Markets, a full-service global provider of capital solutions for real estate investors and occupiers. “So, in my opinion, we should see rents turn the corner in a year or 18 months as more jobs create more housing, which creates more demand for storage.”

Bisnow, Brief Pause In Construction Helps Houston Self-Storage Stay Healthy

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