Owners are often searching for a single, decisive action that will meaningfully increase the value of their self-storage facility. The good news is that such an answer does exist. The bad news is that, much like that time in college I tried to run 100 miles, it is far easier to describe than to execute.
Last year, we brokered 52 self-storage transactions, and activity this year has accelerated even further. Increased deal flow is being driven by an influx of capital and a growing number of motivated sellers. On the capital side, both equity and debt availability have improved. Federal Reserve rate cuts beginning last fall reignited buyer interest, while lenders have shown a renewed push this year to grow new loan originations. On the seller side, many owners are more willing to transact as operational or financing pressures mount, including challenges with existing lenders. Despite this increased activity, the market remains risk-averse. Buyers are largely underwriting deals based on in-place cash flow rather than speculative or projected revenue growth. As a result, value is being driven by what a facility is earning today, not what it could potentially earn tomorrow. With that context, the most effective way to increase the value of a facility is clear.
The single most impactful lever an owner can pull is increasing revenue. Raising rental rates for existing tenants is often the lowest-hanging fruit, particularly in portfolios where rate management has been inconsistent. Strategic increases in advertising spend to drive occupancy can also meaningfully improve top-line performance when executed thoughtfully. Selling tenant insurance is another proven avenue to enhance revenue, and when implemented across an entire facility, the incremental income can be significant. Owners should also take a hard look at internal practices. “Owner units” should be occupied at market rates, just like any other unit, and all tenant cash payments should be fully and accurately recorded. These details may seem minor, but in aggregate they directly impact reported income and, ultimately, valuation.
It is not uncommon for owners to focus on initiatives that feel productive but do little to move the needle on value. Aesthetic improvements or pursuing an influx of online reviews may enhance appearance or visibility, but they do not materially affect how buyers underwrite a facility.
Finally, the method of sale matters more today than ever. Elevated interest rates continue to constrain certain buyers’ ability to pay on-market prices, prompting many buyers to pursue off-market acquisitions to get a deal. However, competition drives value. Our listed properties typically generate between five and eleven offers, and it is this competitive tension that consistently produces the highest price for sellers. In the end, that is the result every owner is seeking.
About the Author:
Thomas Parsons is Senior Director of Investments with The LeClaire-Schlosser Group in Denver, Colorado. He serves clients in acquisitions and dispositions of self-storage real estate throughout multiple regions of the United States. His 18 years of professional experience include management consulting in banking and private equity. Mr. Parsons moved to Denver in 2006 to pursue his MBA at the University of Colorado Denver, specializing in finance, after graduating from the University of Maine Farmington with a BA in Business and Economics. When not in the office, Thomas can be found canoe camping in the remote Maine wilderness or running international marathons in places such as South African game preserves or the barren landscape of Antarctica. At home, Thomas is the father of two four-year-olds and enjoys coaching his kids’ soccer teams. https://leclaireschlossergroup.com/
