Mike Mele
Vice Chairman
Cushman & Wakefield
Last October, Blackstone Group Inc put a $1.2 billion price tag on their self storage market confidence. Their purchase of Simply Self Storage set off the alarms of investors worldwide and threw significant weight behind what insiders already knew: self storage has legs. Together, with Elliott Management and numerous other industry players, investor interest is at an all-time high. In addition to engagement from powerhouse investors, self storage properties are seeing a boost in valuations thanks to increased rates and occupancies.
According to data from Yardi Matrix, 10×10, non-climate street-rate averages climbed 3.5% year-over-year for January and climate-controlled rents saw an increase of 2.3%. In fact, 87% of the top markets saw positive annual street-rate performance to start the year. And while fears of overbuilding dominated 2019, the COVID-19 pandemic produced an unnatural moratorium on new construction, allowing markets to level out and restore a healthy balance. These factors alone equate to the perfect storm for owners hoping to sell at top dollar, but what’s happening on the lending side is equally exciting.
Historically low rates and heightened lender confidence are driving more and more self storage transactions. Banks are desperate to strengthen their balance sheets and they’ve taken note of the resiliency shown by self storage during the global recession. Lenders, influenced by big investors’ piqued interest and bolstered by self storage’s stellar performance, are eager for the next opportunity. According to our research, several markets exceeded their 2019 numbers. It even outperformed multi-housing, industrial and office sectors through the pandemic’s recession. The combination of institutional players entering the market, rising fundamentals and aggressive lending is translating to higher valuations on transactions across the nation. While there are no guarantees in commercial real estate, today’s environment really does look like the perfect storm for self storage owners looking to make a move.
