Self-Storage Sector Transforming

CHICAGO—REITs and private buyers have been buying self-storage properties at a fast clip for several years, and it’s easy to see why. The sector, long-dominated by small operators, has had high occupancy and the larger, more sophisticated self-storage businesses have maintained strong growth in NOI. But even though investors have flocked to the properties, banks seem to keep their distance from proposals to build additional self-storage developments.

“It’s surprising that construction is so slow,” Marc A. Boorstein, a principal of Chicago-based MJ Partners Real Estate Services, tells GlobeSt.com, “since demand has not slowed down at all. But when you open up a new self-storage site, you have no tenants, so it’s considered a speculative development, and many banks don’t want to make loans for speculative deals in self-storage.”