In a year filled with challenges, uncertainty and rapid change, gratitude has never been more important to keep in focus. I apologize in advance to sound cliché, but it is impossible to be grateful and unhappy at the same time. Therefore, I kindly urge everyone reading this to be extremely thankful being in the self storage sector. Amazingly, right now seems to be some of the best timing for both buyers and sellers. I believe I have seen more win/win transactions in 2020 than I have in my last eight years in the industry. In a world of “wait and see”, the groups that have taken action this year or have taken proactive steps to plan, have all positioned themselves to win during a very challenging period in the world.
Thankfully, values have never been higher for self storage properties on average. The whole industry has performed better through the pandemic than almost every other CRE asset type. Cap rates have been on average 25 to 75 basis points lower than this time last year. This is due to record amounts of capital pouring into self storage and all-time low interest rates ranging from 3%-4.5%. Class B and C properties have proven to be the most income resilient properties through the pandemic which has slightly evened the playing field amongst properties values and cap rates.
Thankfully, the future is looking bright. Even with values higher than we have ever seen on average, investors still have a great reason to be optimistic about future appreciation in property values. Yardi announced in their November reports that occupancies for a standard 10 x 10 unit has remained strong and they have seen a year over year increase in average rent for the first time since 2017. I, personally, expect this trend to continue. The spread between the 10-year treasury and self storage cap rates has been wider than we have ever seen. This has given strong confidence to investors and lenders that values will continue to increase. This has caused many of them to optimistically quote and compete for loans with extremely competitive terms.
Thankfully, we are all working together to collaborate and thrive. The improvement in shared market data has helped investors and developers safely navigate through markets to avoid market oversaturation which has kept rents and occupancies stronger than in the past. Industry data has helped investors focus their energy on undersupplied markets and has allowed for some market corrections and absorption in markets that had been previously overbuilt.
The Hatcher Group and I are extremely grateful for all our clients, relationships and our friends at List Self Storage for providing an amazing community to help each other grow and thrive. We urge everyone reading this to reach out if you ever need any free advice, free property valuations and if there is anything, we can do to help you succeed in 2021 and beyond!
