Proceed With Caution in Las Vegas Self-Storage Market

Las Vegas has had tremendous population and job growth in the last 12 months, and the growth has fueled new self-storage construction activity. However, the demand may not be strong enough to absorb the new supply—and self-storage investors should proceed with caution when investing in the market.

“Through the years, we have generally done well in Las Vegas when we have done our homework and drilled into sites where we have liked the characteristics,” Wayne Johnson, chief investment office at Strategic Storage Growth Trust, tells GlobeSt.com. “Las Vegas went into an overbuilding mode of residential and then hit a tough time five or six years ago. Since that time the residential market has recovered. So, we like the market, like any market that is growing and has an urban setting, but we have to be very careful because there is a lot of self-storage development activity. People are building a lot. There is opportunity as the Las Vegas market grows, but it is a time to be cautious as people are building a little bit close to each other in some situations.”

That isn’t to say that there aren’t opportunities in the market, however. Strategic Storage Growth Trust has purchased a new construction 569-unit self-storage property in the market. “The facility that we just bought was a certificate of occupancy structure,” says Johnson. “We like the fact that there are some barriers to entry there. It is also across the street from a new grocery-anchored retail center that is going in adjacent to the freeway, so it also have the retail characteristics that we like. We see all of these factors coming together to create a good sub-pocket there.”

With population growth, one would assume there is significant demand for self-storage; however, Johnson says that it is on a case-by-case basis. “In some cases yes, and in some cases no,” says Johnson about whether the demand supports the new supply. “We go through the same process on every acquisition and look at the velocity of residential growth and retail growth and weigh that against the self storage coming into the market in a two- or three-mile radius.”

Self-storage also has a long lead time on new construction, and so it is important to look closely at the market to justify new development or the purchase of a new property. “Self-storage also has a long lead time,” says Johnson. “There is six-months of entitlement time once you locate a site and then a year of construction. That is something to pay attention to, and I am probably more focused on that then anything these days.”

Still, Strategic Storage Growth Trust is going to continue to be a player in the Las Vegas market. “We just have to pick-and-choose, but we are generally interested in the Las Vegas market,” adds Johnson. “We are absolutely interested in acquiring there. We are focused on stabilized properties and certificate of occupancy transactions.”