Self-Storage Remains Popular with Investors Despite Saturation Concerns

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Sara Townsley

Self-Storage Remains Popular with Investors Despite Saturation Concerns

Q4 – Self Storage Snapshot

Whispers of overbuilding and an oversaturated self-storage market have failed to keep investors away and acquisition activity of existing self-storage facilities across the country remained strong in Q4 2018.  While rent growth has slowed to single digit numbers (3-5%) in many markets alongside other markets reporting declining figures, occupancy rates are being reported at all-time highs upwards of 90% or more among many of the top REITs.  One example are the self-storage facilities managed by Cube, who reported an occupancy rate of 92.7% heading into fourth quarter 2018.

Opportunity for development still remains feasible in the right pockets of many markets.

While investment activity remains strong, certain markets have seen declines in rental rates due to an influx of new developments within a concentrated area.  Portland, OR and Nashville, TN reported rental rate declines of more than 5% according to a November study performed by Yardi, while Las Vegas, NV reported positive growth numbers of 3.1% at the end of 2018. Locally, Montana’s fluctuations were minor with changes at less than 1% in either direction.  The Missoula market posted the most consistent positive rent growth over Q3 2018.  Missoula’s 10 x 20s took the top growth spot with an average rate increase of $1.62/month.  Flathead and Bozeman/Belgrade markets experienced some of the typical seasonal slow-down with rates holding steady or slightly dropping, however demand is anticipated to remain healthy in these areas in 2019.

Opportunity for development still remains feasible in the right pockets of many markets.  Since most storage customers choose to rent from a facility within one to three miles of their home, careful assessment of surrounding demographics can open up opportunities in overlooked areas of robust urban housing development, healthy employment growth and population increases.  Many developers have started to look towards secondary and tertiary markets, like Montana, for opportunistic sites.

Snapshot: Asking Rents Across The State

Below is a snapshot of asking rents in a handful of metropolitan markets across Montana.  Sterling CRE works with operators to gather rates from a wide variety of Class A and B+ facilities to provide the best possible side by side comparison. While a seasonal slow-down typically occurs in Montana markets, rental rate declines have been minimal compared with Q3 2018.

Claire Matten

If you are a self-storage facility owner and would like a complete market study for your development(s) including demographics, aerial photographs, and rent studies, please reach out to Sterling CRE Advisors for a full evaluation.

If you have interest in acquiring self-storage facilities or adding to your portfolio,  please contact us to explore the current opportunities available that may meet your investment requirements.

Contact Claire Matten today!

Matt Mellott
Matt Mellott, CCIM/SIOR

Self-Storage Remains Popular with Investors Despite Saturation Concerns