CBRE Group Inc., a commercial real estate services and investment firm, has released a report examining the results of its first-quarter 2016 “Self Storage Investor Survey” through its Valuation & Advisory Services Division. The three-page report concludes investors are exploring secondary markets as capitalization (cap) rates “continue to compress in the self-storage sector,” according to a press release.
The report includes metrics on key indicators in the self-storage market, including cap rates, discount rates, market rent change and residual cap rates. It also provides observations on market segmentation by property class and a quarterly cap-rate comparison between apartments and self-storage.
Since 2010, self-storage cap rates have compressed 275 basis points, which is an average of 5 basis points per quarter, according to the report. More recently, the compression has slowed to 4 basis points per quarter.
“The spread among class A, B and C narrows slightly, suggesting buyers are looking more to secondary and tertiary markets for product,” said R. Christian Sonne, executive vice president and National Self Storage Valuation Group leader at CBRE. “One national operator complained about finding class-A product and the completive environment there. There remains a 65 basis point spread from class A to class C, but this can range much higher depending upon the asset and location.”
In its comparison between the apartment and self-storage sectors, the report indicates the quarterly variance between the two markets has been 53 basis points on average. During the past year, however, the gap has narrowed “significantly,” which could indicate a trend. CRBE will continue to monitor this metric comparison, Sonne said.
A PDF version of the investor survey report is available as a free download from the CBRE website.
The CBRE Valuation & Advisory Services Group provides appraisals, feasibility and market studies, underwriting due diligence, and other consulting services. It has a staff of more than 1,700 appraisers, architects, engineers and environmental scientists in more than 300 metropolitan areas around the world.
CBRE Group, a Fortune 500 and S&P 500 company headquartered in Los Angeles, employs approximately 70,000 employees, excluding affiliates, and serves real estate investors, occupiers and owners through more than 400 offices worldwide. CBRE offers strategic advice and execution for appraisal and valuation; corporate services; development services; investment management; mortgage banking; property, facilities and project management; property sales and leasing; and research and consulting.