IRVINE, CA—Vacancy in Orange County’s self-storage sector is expected to decrease by 40 bps this year, down to 12.7% by year’s end, reports Marcus & Millichap. Projected to be slightly above the national average of 12.6%, the vacancy reflects increased demand for self-storage units in the county that stems from gains in employment and population, according to the firm.
Employment growth in the market is expected to accelerate this year as employers expand hiring by 2.7%, creating 39,100 positions. In 2013, employment grew 2% from the previous year, with the addition of 28,600 jobs, M&M reports.
In addition, the county’s population has grown at a 1.2% clip since 2008 on an annual basis, with the addition of 179,000 new residents. Over the next five-year period, Orange County will gain 173,000 individuals, representing an increase of 1.1% per year, says M&M.
The improved picture is causing mom-and-pop owners—the majority of self-storage investors—to raise rents, Roberto Munoz, a senior associate with M&M, tells GlobeSt.com. “Mom-and-pops are starting to do rent increases, and they’re not afraid of doing it. It also helps increase the revenue of the properties.”
Asking rental rates for self-storage properties across the board are expected to increase this year, says M&M. Tightening conditions will enable operators to raise rents at climate-controlled and non-climate-controlled facilities 2.2% to $181 per unit and 1.7% to $156 per unit, respectively. M&M reports that in 2013, asking rents for climate-controlled space rose 0.9%, while rental rates for non-climate-controlled units ticked up 0.4%.
California’s self-storage supply is below the national average at 5.1 square feet per capita; the national self-storage supply is estimated to be 7.4 square feet per capita. The Los Angeles/Long Beach/Anaheim, CA MSA’s supply is well below both the state and US averages with 3.7 square feet per capita.
As GlobeSt.com reported in March, land, self-storage and multifamily are three asset classes poised for growth, said panelists at the recent REISA Spring Symposium in San Diego. According to moderator Derek Peterson of Walton International, while seemingly unrelated, the three categories derive their growth from the same source: population growth.
Stay tuned to the Orange County page for more insights from M&M’s Roberto Munoz on the self-storage sector.