Self Storage Deals Still Getting Done, They're Just Different Now

There is still a need for more storage in the U.S., so deals are out there and they will get done, according to Steven Weinstock, National Director, Self Storage Division, Marcus & Millichap. Speaking during his firm’s news video, Weinstock said Americans like stuff. “And last I checked, we’re not buying less, we’re buying more, and we need a place to put it,” he said.

Several big billion-dollar deals with hundreds, if not thousands of properties across the United States took place recently, but opportunities remain, Weinstock said.

“There are a lot of 10-, 20-, 50-unit portfolio owners out there,” he said. “And as they continue to grow, that creates an opportunity for even the smaller owners to sell up or an opportunity for a smaller owner themselves to acquire and grow their portfolio.”

He said cap rates year over year have gone up 75 to a hundred basis points and in some situations is becoming negative leverage – meaning that they’re borrowing money at a cost that is higher than the return that they’re getting.

Weinstock said deals still getting done, they’re just different now.

“They take an investor who is willing to pay a little bit more than other people to break into a marketplace,” he said.

“It takes an existing owner to say, ‘I want a cap rate of 2021 or 2022’ when we saw cap rates dipping into low fours into the low fives.’ Instead find an owner who says, ‘Well, we’re returning to a more normal market.’ ”

Normal cap rates are in the 6s and if we went back to 2018 or 2019, they were in the high sixes. “There’s great opportunity for the astute owner who says, ‘I’m willing to give a little bit so that I could sell it and harvest my gains right now,’” Weinstock said.

“So, the yin and yang between a buyer who’s willing to take a chance, add value, be creative, use technology, and they use that as an opportunity to be able to sell a property.”