CHICAGO—Self-storage buildings have continued to perform well during the third quarter of 2013, according to a new report by Chicago-based MJ Partners Real Estate Services. The top four self-storage companies all saw revenue increases between 5.5% and 9.0% in the third quarter, MJ Partners found. Furthermore, the NOIs of each company grew as well, ranging from 7.2% to 10.0% year-over-year. The researchers also found strong customer demand and robust acquisition activity. Occupancy rates ranged from 90.5% to 94.4% and the publicly-listed REIT Public Storage, the largest storage firm with 2,110 US sites, just this year either acquired or had under contract about $1 billion worth of properties.
“The acquisition market has come to a rolling boil with just a plethora of deals hitting the market,” said David Rogers, the CEO of Sovran Self-Storage, which, with 475 sites, is also one of the big four. “The recent low cap environment has enticed the new group of owners to list their properties, or at least entertain discussions to sell them.”
“Self-storage has been such a proven commodity year-after-year,” said Marc A. Boorstein, a principal of MJ Partners. But 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 its Self Storage Market Overview, Third Quarter 2013, “serves as a benchmark of the current investment market, operations performance, capital markets and trends within the self storage industry.”
“What we like about self-storage is that in good times and bad, people need storage; it always provides a good, steady cash flow,” said Christopher Merrill, the co-founder, president and CEO of Chicago-based Harrison Street Real Estate Capital. Furthermore, even though this makes these properties very attractive to potential buyers, “it's still very much a Mom-and-Pop industry,” with roughly 60,000 properties, many locally-owned. Even after several years of consolidation, institutional investors such as REITs only own between 10% and 15% of this total. “There's still a lot of room for growth and a lot of consolidating to do.”
Last month, Harrison Street completed what the firm's officials called the largest self-storage portfolio transaction to date when they sold 43 properties in Texas, North Carolina, South Carolina, Virginia and Georgia with 22,500 units to Public Storage.
During the third quarter, Extra Space Storage, the second-largest owner with 1,007 properties, acquired 22 properties for about $214.5 million. CubeSmart, which has 520 properties, acquired four assets for $38.8 million.
The “self-storage industry finds itself in a great operating environment-new supply remains low and customer demand remains stable, occupancies are at historically high levels, and discounting is at record lows,” said Spencer Kirk, the CEO of Extra Space Storage.
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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.
