{"id":6150,"date":"2024-05-13T15:17:36","date_gmt":"2024-05-13T15:17:36","guid":{"rendered":"https:\/\/listselfstorage.com\/us\/industry-insights\/?p=6150"},"modified":"2024-10-09T14:58:15","modified_gmt":"2024-10-09T14:58:15","slug":"where-has-all-the-value-gone","status":"publish","type":"post","link":"https:\/\/listselfstorage.com\/us\/industry-insights\/where-has-all-the-value-gone\/","title":{"rendered":"Where Has All The Value Gone?"},"content":{"rendered":"<p><!-- VideographyWP Plugin Message: Automatic video embedding prevented by plugin options. --><br \/>\n<span style=\"font-size: medium;\"><span style=\"color: #222222;\"><span style=\"font-family: Lato, Helvetica Neue, Arial, Helvetica, sans-serif;\">It\u2019s no secret that capital markets and all forms of real estate have been impacted by the rise in interest rates over the past few years. Coming from historically low rates to a higher rate environment comes with plenty of challenges, particularly for those who have bought or built assets over the past 3-4 years.<\/span><\/span><\/span><\/p>\n<p><span style=\"font-size: medium;\"><span style=\"color: #222222;\"><span style=\"font-family: Lato, Helvetica Neue, Arial, Helvetica, sans-serif;\">Of course, interest rates aren\u2019t the only issue facing the self-storage industry and current asset values. Additional headwinds have come from a few different sides, and each of these could be the subject of separate articles:<\/span><\/span><\/span><\/p>\n<ul>\n<li><span style=\"font-size: medium;\"><span style=\"color: #222222;\"><span style=\"font-family: Lato, Helvetica Neue, Arial, Helvetica, sans-serif;\">Interest rate spikes, from historic lows in the 3% range to 7++%.<\/span><\/span><\/span><\/li>\n<li><span style=\"font-size: medium;\"><span style=\"color: #222222;\"><span style=\"font-family: Lato, Helvetica Neue, Arial, Helvetica, sans-serif;\">Oversupply in many submarkets pushing market rents and occupancy down.<\/span><\/span><\/span><\/li>\n<li><span style=\"font-size: medium;\"><span style=\"color: #222222;\"><span style=\"font-family: Lato, Helvetica Neue, Arial, Helvetica, sans-serif;\">COVID-19 impact has waned, and demand slipped back to the pre-pandemic trendline.<\/span><\/span><\/span><\/li>\n<li><span style=\"font-size: medium;\"><span style=\"color: #222222;\"><span style=\"font-family: Lato, Helvetica Neue, Arial, Helvetica, sans-serif;\">Expense Increases \u2013 property insurance, property taxes, payroll, and online marketing.<\/span><\/span><\/span><\/li>\n<li><span style=\"font-size: medium;\"><span style=\"color: #222222;\"><span style=\"font-family: Lato, Helvetica Neue, Arial, Helvetica, sans-serif;\">Street Rate strategies of the REITs pushing rents down to support occupancy levels.<\/span><\/span><\/span><\/li>\n<\/ul>\n<p><span style=\"font-size: medium;\"><span style=\"color: #222222;\"><span style=\"font-family: Lato, Helvetica Neue, Arial, Helvetica, sans-serif;\"><img loading=\"lazy\" class=\" wp-image-6152 alignright\" src=\"https:\/\/listselfstorage.com\/us\/industry-insights\/wp-content\/uploads\/2024\/05\/Graph-for-LSS.jpg\" alt=\"\" width=\"401\" height=\"248\" \/>All of these factors combined have been a<\/span><\/span> <span style=\"color: #222222;\"><span style=\"font-family: Lato, Helvetica Neue, Arial, Helvetica, sans-serif;\">headwind on the industry and on a combined basis they have accounted for a drop in average selling prices compared to 2020-2022 levels. Looking back to 2018 and before the average price per square foot trendline is still positive. Based on recent sales activity it does appear that the worst of this current cycle may be in the rearview mirror \u2013 the caveat being that interest rates don\u2019t go up any further and the economy doesn\u2019t suffer a major setback.<\/span><\/span><\/span><\/p>\n<p><span style=\"font-size: medium;\"><span style=\"color: #222222;\"><span style=\"font-family: Lato, Helvetica Neue, Arial, Helvetica, sans-serif;\">Today more deals getting done with creative<\/span><\/span> <span style=\"color: #222222;\"><span style=\"font-family: Lato, Helvetica Neue, Arial, Helvetica, sans-serif;\">financing terms such as, seller financing, lease with a purchase option, sale-leasebacks and more. Acquisitions that require traditional financing remain challenging as interest rates are generally still higher than CAP rates \u2013 meaning there is negative cash flow associated with traditional financing.<\/span><\/span><\/span><\/p>\n<p><span style=\"font-size: medium;\"><span style=\"color: #222222;\"><span style=\"font-family: Lato, Helvetica Neue, Arial, Helvetica, sans-serif;\">With the 2024 spring leasing season showing signs of life, interest rates moderating, the unemployment rate remaining historically low and the economy continuing to grow, the market for self-storage asset sales should improve throughout the second half of this year.<\/span><\/span><\/span><\/p>\n<p><span style=\"font-size: medium;\"><span style=\"color: #222222;\"><span style=\"font-family: Lato, Helvetica Neue, Arial, Helvetica, sans-serif;\"><b>About the author<\/b><\/span><\/span><span style=\"color: #222222;\"><span style=\"font-family: Lato, Helvetica Neue, Arial, Helvetica, sans-serif;\">:<\/span><\/span><\/span><\/p>\n<p><span style=\"font-size: medium;\"><span style=\"color: #222222;\"><span style=\"font-family: Lato, Helvetica Neue, Arial, Helvetica, sans-serif;\"><b>Tom de Jong, MBA, SIOR<\/b><\/span><\/span><span style=\"color: #222222;\"><span style=\"font-family: Lato, Helvetica Neue, Arial, Helvetica, sans-serif;\"> is a founding member of the Colliers National Self Storage Group, founder of <a href=\"https:\/\/www.colliers.com\/en\/countries\/united-states\/cities\/reno\/de-jong-becher-self-storage-team\" target=\"_blank\" rel=\"noopener noreferrer\"><span style=\"text-decoration: underline;\"><strong>the de Jong I Becher Self-Storage Team<\/strong><\/span><\/a> at Colliers \u2013 one of the top national self-storage brokerage teams and has been a commercial real estate broker since 2007.<\/span><\/span><\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>It\u2019s no secret that capital markets and all forms of real estate have been impacted by the rise in interest rates over the past few years. Coming from historically low rates to a higher rate environment comes with plenty of challenges, particularly for those who have bought or built assets over the past 3-4 years. Of course, interest rates aren\u2019t the only issue facing the self-storage industry and current asset values. Additional headwinds have come from a few different sides, and each of these could be the subject of separate&hellip;<\/p>\n","protected":false},"author":13,"featured_media":6184,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[21],"tags":[],"gutentor_comment":0,"_links":{"self":[{"href":"https:\/\/listselfstorage.com\/us\/industry-insights\/wp-json\/wp\/v2\/posts\/6150"}],"collection":[{"href":"https:\/\/listselfstorage.com\/us\/industry-insights\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/listselfstorage.com\/us\/industry-insights\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/listselfstorage.com\/us\/industry-insights\/wp-json\/wp\/v2\/users\/13"}],"replies":[{"embeddable":true,"href":"https:\/\/listselfstorage.com\/us\/industry-insights\/wp-json\/wp\/v2\/comments?post=6150"}],"version-history":[{"count":5,"href":"https:\/\/listselfstorage.com\/us\/industry-insights\/wp-json\/wp\/v2\/posts\/6150\/revisions"}],"predecessor-version":[{"id":6185,"href":"https:\/\/listselfstorage.com\/us\/industry-insights\/wp-json\/wp\/v2\/posts\/6150\/revisions\/6185"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/listselfstorage.com\/us\/industry-insights\/wp-json\/wp\/v2\/media\/6184"}],"wp:attachment":[{"href":"https:\/\/listselfstorage.com\/us\/industry-insights\/wp-json\/wp\/v2\/media?parent=6150"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/listselfstorage.com\/us\/industry-insights\/wp-json\/wp\/v2\/categories?post=6150"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/listselfstorage.com\/us\/industry-insights\/wp-json\/wp\/v2\/tags?post=6150"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}