Still Want To Invest In Self Storage?

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Sara Townsley

Still Want To Invest In Self Storage?

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While cap rates have stabilized over the past quarter, the recent drop in interest rates could cause some compression as investors take advantage of the low cost of capital.  Interest in self-storage remains high and is shifting towards acquisitions of existing facilities rather than new development.  Primary features investors are currently looking for in regard to Montana acquisitions are:

Rent Upside Potential.  Investors are scouring tertiary markets such as Montana for value-add storage opportunities.  Buyers are often willing to accept a lower going-in cap rate if an owner or their real estate broker can prove they are currently charging below market street rates.  If a Montana operator can properly position their facility in a way that clearly demonstrates rent growth potential, it’s likely they’ll be able to command a higher than the capitalized current net operating income stream indicates.
Ability to Expand. Our team has worked with a handful of operators across Montana in the disposition of their facilities.  One of the primary questions we receive from at least 60% of buyers is if the facility has additional acreage and expansion capability.  Often times operators can use additional land as “secure parking” to generate revenue while they come up with a strategy to add more units.
Off-Site Management. A number of storage operators self manage their facilities however, one of the large draws to the industry is the ability to manage off-site.  Kiosks, cutting edge management software, automated gates and key-code systems, and the ability to have an on-site employee present if need be are all features investors are looking to either have in place or the ability to implement themselves down the road.  Whether any of these features are in place or not will likely have a direct impact on your asking price in the event you elect to sell you facility.


The fear of saturation has created a strong resistance in some communities aimed to direct development of mixed use commercial land away from self-storage.  In Montana and many other areas across the country, property owners within city limits are facing approval challenges as many jurisdictions are fighting the use of in-fill land for self-storage.  Some cities are going as far as implementing development moratoriums to suspend self-storage development or expansion application requests.

Large REITs have moved away from acquisitions to joint ventures and third-party management platforms due to concerns of new supply and increasing development costs. This strategy creates an opportunity for them to control a large percentage of the market while not outright purchasing the properties.

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.
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Matt Mellott
Matt Mellott, CCIM/SIOR

Still Want To Invest In Self Storage?