CHICAGO—Self-storage buildings have continued to spread through the country during the second quarter of 2013, according to a new report by MJ Partners Real Estate Services. The expansions by many of the leading storage companies continues the stupendous growth self-storage has undergone since the 1970's. That has many wondering whether institutional investors will eventually give the sector the same attention, and money, allocated to burgeoning sectors like student housing or healthcare real estate.
“Self-storage has been such a proven commodity year-after-year,” says Marc A. Boorstein, a principal of the Chicago-based MJ Partners. But one thing the sector lacks are comprehensive sources of information that will help prospective investors understand the marketplace and make decisions on allocating funds. MJ Partners wants to help change that, and says its “Self Storage Market Overview, Second Quarter 2013,” an analysis of self storage companies' recent earnings results, “serves as a benchmark of the current investment market, operations performance, capital markets and trends within the self storage industry.”
An increasing number of Americans are in less stable living arrangements, MJ Partners says, and that increases the demand for self-storage facilities. Much of this can be attributed to the economic conditions during the past few years. The report cites Jed Kolko, the chief economist at Trulia, Inc., who says that “2.4 million Americans are now considered 'missing households' either living with parents, seniors living with adult offspring, and unrelated people renting rooms. Far higher than only the 900,000 in 2008.”
And according to data from the US Census Bureau, the US home ownership rate now stands at 65.1%, down from a peak of 69.2% in 2004. The significance of this decline, MJ Partners says, is that “the average homeowner moves every 9 years—about the same over the past decade.” But the “average renter moves every 2 to 3 years.”
All those “missing households” and renters on the move need to store their belongings somewhere. MJ Partners tabulated the results from some of the nation's largest self-storage providers and found they experienced another solid quarter. At Public Storage, a storage behemoth with 2,081 US sites and 188 in Europe, revenue increased 5.1% over last year's second quarter. Furthermore, their same-store net operating income grew by 8.4% and occupancy ticked up from 92.4% to 94%.
Extra Space Storage, which has 974 sites, CubeSmart, with 519, and Sovran Self Storage, Inc., with 471, saw their revenues grow between 7.8% and 9%. And their NOIs grew between 10.4% and 13.1%.
And those gains have fueled growth. According to the report, Public Storage expects to complete the acquisition of 29 facilities in the third-quarter for about $374 million in cash. These properties have a total of about 2.3 million-square-feet, with 21 locations in Florida, five in Massachusetts, two in California, and one in Rhode Island. And the company's development pipeline of new projects and expansions will add another 1.4-million-square-feet for the aggregate cost of $198 million.
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Brian J. Rogal
Brian J. Rogal is a Chicago-based freelance writer with years of experience as an investigative reporter and editor, most notably at The Chicago Reporter, where he concentrated on housing issues. He also has written extensively on alternative energy and the payments card industry for national trade publications.
