\nIf you talk to anyone in the storage industry, they will tell you that they have never seen a market as hot as this one. Existing facilities are full, rents are rising, cap rates are at historic lows and every supplier is so inundated with orders that they cannot keep up. The word \u2018unprecedented\u2019 has been used an unprecedented number of times in the last 16 months, but there is no better word to describe the self storage market \u2013 what is happening right now is unprecedented.<\/p>\n
The best advice is to create a sound investment strategy, stick to your guns and recognize that nothing lasts forever \u2013 even a red-hot market.”<\/p><\/blockquote>\n
Everything is going gangbusters in this business, but does that mean it is the right time for YOU<\/em> to buy or build? \u2018Probably not,\u2019 would be my answer. If the project you are looking at right now only works because you are taking today\u2019s numbers and growing them indefinitely or extrapolating today\u2019s leasing velocity for development projects \u2013 you\u2019re overpaying! The demand bump that storage has received due to the pandemic is bound to retreat and the sky-high rents that have spurred every Tom, Dick and Harry to build will inevitably increase supply. Increasing supply coupled with decreasing demand is only going to have one effect on occupancies, rents and values \u2013 the laws of supply and demand will not be defied by self storage.<\/p>\n
That being said, we did close on a facility last week and we are closing on another next week. Each property had a compelling story as to why it made sense to buy. Each is in a supply constrained market, each is being acquired at a substantial discount to prevailing comparables and each complements our existing portfolio. There are still good deals out there, but at a moment in time like this, there needs to be a compelling reason to move forward. It probably does not make sense to \u2018reach\u2019 right now for a deal. The best advice is to create a sound investment strategy, stick to your guns and recognize that nothing lasts forever \u2013 even a red-hot market.<\/p>\n