The self-storage niche has been thriving in markets where multifamily demand has proven unyielding in the last several years. Because San Diego, according to Scott Peterson of CBRE, considers multifamily its darling, it is no surprise that an active self-storage market has erupted. The recent sale of a 900-unit self-storage facility in Chula Vista illustrates the hot demand. Although the newly constructed property has yet to go through a leasing campaign, it received fervent bids from investors looking to plant capital in the self-storage niche market.

Strategic Storage Growth Trust, an investment trust sponsored by SmartShop Asset Management, LLC won the deal. While the deal shows the firm's enthusiasm, it also has some concerns about new development. “We are optimistic that the self-storage market will continue to perform well in San Diego,” Wayne Johnson, chief investment officer at SmartShop Asset Management, tells GlobeSt.com. “There is quite a bit of new development activity either underway or in the entitlement phase in the market. Hopefully those new locations won't create overbuilt pockets in some of the sub-markets. We are paying close attention to this activity.”

Still, the fundamentals driving self-storage activity remain strong. Among them, Johnson lists: a steadily increasing population, barriers to entry caused by overall development costs and municipal requirements, and an active military presence. “These all provide a solid growth opportunity for us,” says Johnson. The property is in the middle of a growing area of Chula Vista near newly developed residential, single-family and multifamily property, and while self-storage development in San Diego is potentially becoming overheated, it isn't in this particular submarket. “The area has also not seen much new storage development activity until recently, and that pent up demand has already shown in starting to lease the new facility. Additionally, the lack of square footage of self-storage per capita in the submarket added to its attractiveness,” explains Johnson. “There may be competition in new people coming in and building storage.”

Although the investor is paying close attention to the supply of new self-storage product, they are optimistic on the San Diego market and are planning to remain active in the market. “Our strategy is to locate our stores in the path of population growth and in close proximity to active retail centers,” adds Johnson. “We are searching for additional acquisition opportunities. We worked with a commercial broker focused on the Southern California markets.”