CHICAGO—MJ Partners just published its latestquarterly overview of the self-storage industry, and once again thestudy shows that the top four self-storage REITs in the sector havemaintained very healthy levels of occupancy and rental increases.Furthermore, cap rates for the properties can't seem to stopfalling as investors compete for acquisitions and new developmentcan't seem to get started.

|

“In the last 12 months, the cap rates have fallen about 100bps,” Marc A. Boorstein, a principal ofChicago-based firm, tells GlobeSt.com. “And we thought the rateswere aggressive 12 months ago. But there's still not a lot of newdevelopment in the business.”

|

The publicly-listed REIT Public Storage, thelargest storage firm with 2,200 US sites, had an implied cap rateof just 4.3%. Extra Space Storage,CubeSmart and Sovran Self-Storagewere between 5.1% and 6.4%.

|

“Everyone is enjoying high occupancy and rental rates,” he adds,even the Mom-and-Pop outlets that sometimes don't have access tothe management tools found in the bigger operators. “But we havenot seen self-storage development commensurate with theresults.”

|

The data from MJ Partners' latest Self Storage MarketOverview show that the top four self-storage firms all sawrevenue increases between 5.1% and 8.3% for first quarter.Furthermore, the NOIs of each grew as well, ranging from 5.6% to9.4%.

|

The researchers also found strong customer demand and somerobust acquisition activity. Occupancy rates ranged from 88.9% to92.6%. During the first quarter, Extra Space Storage, which now has1,052 sites in the US, acquired another 21 properties for about$249.7 million. Seventeen of the properties acquired were in the$213.8 million Mini Price Storage portfolio inVirginia, consisting of 1.5-million-square-feet, 14,000 units, andoccupancy of 90%.

|

“The lack of development is making existing properties morevaluable,” Boorstein adds. Many developers of self-storageproperties still find it difficult to obtain financing sincelenders sometimes see new projects, which always have 0% occupancywhen they first open, as speculative. “There are plenty of lenders,but most will do only one property at a time,” and what the sectorlacks are people who will establish $100 million funds solely fordevelopment.

|

Boorstein says that all of the signs point to another healthyyear for self-storage. “Some of Public Storage's sites in Chicagohave a 99% occupancy, and it has a 92.6% rate in its entireportfolio, and we are not even at the peak season yet.”

|

He believes, however, that the word is getting out. “I would sayI get a call every other day from an investor who will tell me,'these returns, we just can't ignore them anymore.'”

Want to continue reading?
Become a Free ALM Digital Reader.

  • Unlimited access to GlobeSt and other free ALM publications
  • Access to 15 years of GlobeSt archives
  • Your choice of GlobeSt digital newsletters and over 70 others from popular sister publications
  • 1 free article* every 30 days across the ALM subscription network
  • Exclusive discounts on ALM events and publications
NOT FOR REPRINT

© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.

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.