CHICAGO-While the apartment market has been the darling of the disastrous dance of the downturn, self-storage facilities have also been going gangbusters. According to a second quarer report by locally-based MJ Partners Real Estate Services, the four major public owners of self-storage facilities have shown strong revenue growth and continue to acquire large portfolios of properties.
The data in MJ Partners’ “Self Storage Market Overview” show that the companies – Glendale, CA-based Public Storage, Salt Lake City, UT-based Extra Space, Wayne, PA-based U-Store-It and Buffalo, NY-based Sovran are showing same-store revenue up an average 4.3% from Q2 2010. The companies also posted net operating income raises of an average of about 7.5% from last year, have an average occupancy of 85.4% and have an average rent of about $11.77 per square foot.
Marc Boorstein with MJ Partners tells GlobeSt.com that all four companies are going above their target occupancy and are looking to raise rents. “Even thought the discretionary customer has burned off, there are still people needing this property type,” he says.
Rents can be raised easily at these properties because of the amount of units involved, Boorstein says. “If someone has goods at self-storage, whether it’s because of moving, divorce, college or whatever, a company can increase their rent from $105 to $110 and they won’t move out for that. But if you do that for 40,000 customers a month, that’s a major impact on earnings,” he says.
The public companies are also doing well because there’s no new construction. Lenders aren’t willing to take the risk for new construction loans for self storage, Boorstein says, because it’s typically a five-year development process.
On the other hand, banks are more than willing to lend for acquisitions, he says. The public companies, which own less than 10% of all self-storage properties, are on a buying tear.
Public Storage, the largest firm at more than 2,200 properties worldwide, recently acquired the Hughes Family interests in 18 limited partnerships for $13.3 million. The company also acquired interests in two European joint ventures that own 72 properties for $238 million, and is working on a merger agreement to acquire remaining partnership interests in five public partnerships for $154.3 million.
Extra Space has purchased 24 properties for $84.8 million, and is under contract for another $240 million in acquisitions this year. U-Store-It has acquired or has under contract about $113.6 million worth of properties this year. Sovran recently announced it will acquire 19 East Coast properties for $164 million with Heitman LLC (Sovran has a 15% share), and is under contract to acquire $129 million of properties in Georgia, Texas and Virginia.
“All these companies have raised their guidance for the year,” Boorstein says. “Yes, they’re concerned about the current economic uncertainty, but they’re still increasing rents.”
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