CHICAGO—The nation's largest self-storage REITs did impressive business in 2015, recording significant increases in occupancy rates, revenues and net operating incomes, according to a new report from MJ Partners , a Chicago-based self-storage firm. The robust sector also continues to have a relatively low amount of new development, making many existing locations very attractive to investors. "There is certainly more private equity looking to get into self-storage," Marc A. Boorstein , principal, MJ Partners, tells GlobeSt.com. "And if the economy keeps chugging along, it's an excellent play." But what makes these properties especially appealing is that self-storage, which strengthened alongside the economic recovery, has over the long-term also proven quite resistant to economic downturns. "Investors can have the best of both worlds." Public Storage , the largest REIT, has 2,271 US locations and 217 in Europe, and saw its revenue jump 6.5% last year, with an 8.5% increase in net operating income. It ended 2015 with a 93.9% occupancy rate, a bump of about 40 bps. The other big players put up similar numbers. The annual revenue for Extra Space Storage , the next largest with 1,347 US locations, grew by 9.3%, its net operating income 11.9%, and in the last year its occupancy rate increased from 91.4% to 92.9%. Potential investors intrigued by this astonishing growth occasionally ask Boorstein if the sector might be "too frothy" and on the verge of reaching a plateau. "I don't think so," he says, primarily because even though there is more development than one year ago, it is far below the pace set before the recession, and "it has had no impact, zero, on the performance of existing facilities." In fact, the big players have found they can increase rents by double-digits on existing customers and retain their business. Of the five major REITs, only Public Storage put significant resources into new development in 2015, he adds. At year's end, it had about 3 million rentable square feet in various stages of development, costing an estimated $396 million, and another 700,000 square feet in expansion projects worth about $90 million. However, the total annual amount of new construction by all firms is only 20% to 30% of what developers were completing about 10 years ago. That's one of the reasons Boorstein advises potential investors that the best play is new development. "When you have five public REITs, and only one is developing new properties, there is a great return potential," he says. Furthermore, managers have found they can fill up new properties about one year faster than they once did. And quicker lease-ups have given the big players the confidence to buy new facilities on completion, especially those in core markets, rather than waiting for full occupancy. "Over the past year and a half, cap rate spreads for certificate-of-occupancy transactions as opposed to stabilized properties have dropped 100 basis points," says Paul Powell , chief investment officer for Sovran Self Storage , which has 542 US properties and in the first two months of this year entered into contracts to acquire 22 properties.

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Competition Intensifies for Self-Storage Properties

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