TSAG Market Analysis: Toronto

By: The Storage Acquisition Group

Self-storage is self-storage, right? Not necessarily, the Toronto market really is different

In Canada, the self-storage industry seems to be following the same general trajectory as the U.S. sector, with demand for storage increasing, prices rising and investors chasing opportunities wherever they can find them.

But the Canadian self-storage market – particularly in Toronto, the largest city in Canada and the fourth largest city in North America – is indeed different from the U.S. market in scale, pricing, and investment opportunities, thanks largely to Canada’s higher costs and taxes, generally tougher zoning and building restrictions, and fewer self-storage facilities that come on the market for sale, industry officials agree.

“There are similarities between the U.S. and Canadian markets, but Canada is still very much a different market,” says Cory Sylvester, a principal at Radius Plus.

In the case of Toronto, it’s definitely a booming market by almost every standard. The Toronto metropolitan area’s population has soared in recent decades, rising from about 4.6 million people in 2000 to 6.25 million people today. The increase is largely due to Toronto’s dynamic and diverse economy and an influx of immigrants to the region from around the world.

“Toronto has been doing really well,” says Chris Killi, the former chief executive of Real Storage and a member of the board of directors at the Canadian Self-Storage Association. “Toronto has an incredibly strong housing market – and it’s a fast growing city.”

As for storage, Toronto is easily considered Canada’s largest self-storage market with 234 facilities – with additional facilities currently being built to meet the growing demand for space propelled by a fast growing population.

But here’s where the scale issue enters the picture. The square feet of storage space per capita in Toronto is only 2.4, not even half the penetration rate of the average U.S. city, according to Radius Plus data. Indeed, the penetration rate for all of Canada is only about 2.4 percent.

So what’s going on? Remember, it’s a different market.

David Allan, vice president of Apple Self Storage, one of the largest self-storage players in the Toronto area, said there is a number of explanations why Toronto, in particular, and Canada, in general, have fewer storage facilities per capita compared to markets in the U.S.

Canadians have historically used less self-storage space than Americans, partly because they tend not to move from region to region, or city to city, as often as Americans, Allan says. Canada also has a much smaller military than the U.S., with fewer troops and sailors moving from base to base around the country and the world – and thus not requiring as much storage for personal belongings.

Others also point to the fact that Canadian homes, on average, have more basement space than American abodes, thanks to its colder northern climate that requires foundations to be built well below frost lines. In other words, the average Canadian has more home storage space than the average American.

But Allan and others agree financial and regulatory challenges also factor into why there’s a relatively low number of self-storage facilities in Toronto and across Canada compared to the U.S. – and this is where the pricing issue comes into play.

In general, the cost of land and new construction in Canada, especially in the Greater Toronto Area (GTA), are generally more expensive than in the U.S., partially due to “soft” costs, such as high income taxes that drive up labor prices, high commodity taxes and high development fees that make it more expensive to build north of the border

Like some U.S. cities, Toronto and other major Canadian cities also tend to have tough zoning and building codes that make it harder to build new self-storage facilities, industry officials say.

The bottom line: the supply of new self-storage facilities isn’t keeping up with higher demand driven by population increases in Toronto, Vancouver, Montreal, and other major metro areas in Canada. Though Toronto has seen new construction in recent years, it’s nowhere near the levels seen in the more free-wheeling U.S. metropolitan markets, according to Radius Plus data.

The result of both higher construction costs and the supply-and-demand imbalance in Toronto: higher self-storage rental rates.

The average rental price in Toronto is now running around $200 (U.S.) a month for a 10-by-10-foot climate controlled unit – with some areas of the city seeing rental prices in the $300 (U.S.) range, according to Radius Plus data and industry experts.

“The pricing is structurally higher in Toronto,” says Radius Plus’s Sylvester.

Even though Toronto is an expensive city to build and own properties in general, the higher self-storage rental rates are why industry officials, such as Sylvester, Allan, and Killi, are so optimistic about the Toronto market, where occupancy rates remain high.

“Fundamentally, the (rate) numbers in Toronto will continue to outpace the top-tier U.S. markets over the years,” says Sylvester.

Still, Lloyd McDonald, Director of Canadian Acquisitions for The Storage Acquisition Group, says investors interested in jumping into the Toronto acquisition market, or any Canadian metro market, need to be patient. The reason: self-storage owners tend to hang on to properties longer than their U.S. counterparts, due to high capital-gains taxes in Canada.

“Capital gains taxes are always a topic of discussion when it comes to sales,” says McDonald. “The capital gains tax is a major factor in Canada.”

But once investors construct or acquire facilities in Toronto, or in other major Canadian metro areas, the long-term investment prospects are good, said McDonald.

“Self-storage has become an asset class that’s much sought after these days,” he says. “There may not be as many (facilities) for sale, but the pandemic and the economic downturn have recently highlighted the self-storage industry’s strengths. Toronto is a very attractive market.”

Greater Toronto at a Glance

Number of Facilities	234
Total Self-Storage	14.46M Square Feet
Population	6.25M
Penetration Rate	2.4 (City); 3 (GTA)
Median Household Income	$65,829
Percentage of residents renting apartments	32%

  Note: Data from Radius+, industry officials

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The Storage Acquisition Group specializes in purchasing storage facilities and portfolios nationwide. Uniquely, we allow owners to sell direct without having to list their facility. With our 4-tiered approach, Market Analysis, Acquisitions, Underwriting, & Closing Support, The Storage Acquisition Group is able to help owners navigate a simple sales process while netting the highest possible profit.

TSAG Market Analysis: Albuquerque

By: The Storage Acquisition Group

New Mexico isn’t the brightest of the Sunbelt states when it comes to self-storage, but it’s bright enough for current owners and investors who like their future prospects in Albuquerque and other growth areas in the state.

There’s no doubt New Mexico isn’t experiencing the population boom as seen in nearby Texas to the east (8.9 percent, from 2010 to 2020), Arizona to the west (11.9 percent), and Colorado to the north (14.8 percent).

By contrast, New Mexico’s population increased by only 2.8 percent from 2010 to 2020. And the growth in Albuquerque, the state’s largest city at 915,000 people, increased by only 1.67 percent during the same time period, according to the U.S. Census.

Many believe the slower growth, at least compared to other Sunbelt states, is attributed to an “economic malaise” that’s kept the state’s unemployment rate high in recent years. New Mexico’s jobless rate was 8.3 percent in April, above the national average of 6.1 percent

So why are people still encouraged about the state and Albuquerque’s self-storage prospects?

Precisely because they’re both considered relatively stable and steady markets whose long-term attractiveness remains strong as long as Americans keep flocking to Sunbelt states in general.

“We’re not a high-growth market like other nearby states, but we’re still growing and there are great opportunities here,” says Brian Patterson, vice president of development at Titan Development, an Albuquerque-based commercial real estate developer that’s built four self-storage facilities in New Mexico in recent years.

“You can find micro-markets here that are underserved,” he said. “New Mexico has been good to us.”

In many ways, New Mexico – and specifically Albuquerque and its immediate surrounding area – defy normal self-storage industry logic.

The Albuquerque metropolitan area has seen solid, though not hyper-active, new construction in recent years – with a total supply of self-storage space increasing by 9 percent since 2017, according to data from Radius Plus, the research arm of Union Realtime.

Meanwhile, the region’s self-storage penetration rate, or the amount of self-storage feet per capita, remains at a high of 8.1 percent, well above the national rate of about 6.

And yet Albuquerque’s prices have remained relatively strong over the years – and were hovering in May in the $175-per-month range for 10’-by-10’ climate-controlled units, according to Radius Plus data. Occupancy levels have remained above 90 percent.

The city of Santa Fe, the state’s scenic capital located northeast of Albuquerque, is seeing even stronger self-storage prices, ranging in the monthly $225 range, despite somewhat active new construction in recent years. Occupancy levels are also strong in Santa Fe.

“It just goes to show how self-storage is really a market-by-market phenomenon when it comes to performance,” Cory Sylvester, a principal at Radius Plus, says of the seemingly contradictory self-storage data tied to New Mexico in general and Albuquerque in particular.

“Overall, Albuquerque is not a dynamic market, but it’s stable,” Sylvester adds. “It hasn’t seen insane amounts of new supply. Generally speaking, it’s a pretty good market.”

Monty Spencer, president, and CEO of The Storage Acquisition Group says Albuquerque is just like any other self-storage market across the country in one important regard.

“If you do your research thoroughly and carefully, the opportunities are there in Albuquerque and elsewhere in New Mexico,” he says. “It’s important to find the underserved areas within all markets. You just have to look.”

Spencer adds: “Albuquerque has caught the same ride that many of the other self-storage markets have over the past few years and has been buoyed by the pandemic with more people working from home.”

Forrest Thomas, president of Thomas Properties, owner of five self-storage facilities in New Mexico – one in Albuquerque, three in Santa Fe, and one in Roswell – agrees with others that New Mexico, in general, is “not a prime market” compared to other fast-growing Sunbelt states.

But it’s still growing – and both Albuquerque and Santa Fe have seen “quite a few” new facilities built in recent years. Despite the new supply of self-storage, prices have remained relatively strong, Thomas says.

Though Albuquerque is considered a secondary market, large industry players and real estate investment trusts, such as Extra Space, have moved into the market in recent years, though not so much in the smaller market Santa Fe, according to industry officials.

What’s preventing Albuquerque from becoming a hotter region in terms of population growth and thus self-storage growth? The answer, most agree, is the economy. The state simply needs more dynamic employers that produce jobs attractive to younger people, industry officials say.

To be clear: the state has its respected University of New Mexico –as well as the federal government’s Sandia National Laboratories, Los Alamos National Laboratory, and the Air Force Research Laboratory. Netflix also recently announced it will boost its presence in the state by expanding its ABQ Studios in Albuquerque’s Mesa Del Sol area and committing to an additional $1 billion in production spending, according to recently published reports.

But most agree the state needs more major employers — and their accompanying jobs — to start growing at a faster clip.

Dean Alexis, a member of the New Mexico Self-Storage Association and owner of two self-storage facilities in Santa Fe, said the state has been “mired in semi-economic malaise” for a while now. “We’re certainly better than California, but not as good as Texas,” he said of the state’s economic performance of late.

Still, Ryan Goodman, a partner at Around the Corner Self-Storage and a member of the New Mexico Self-Storage Association, says he’s upbeat moving forward. “It’s a good market that I think will grow,” he said. “I’m optimistic.”

Greater Albuquerque at a glance

Number of Facilities	187
Total Self-Storage	9.4M Square Feet
Population	910,000
Penetration Rate	8.1
Median Household Income	$55,383
No. of Facilities in Dev. Pipeline	9

  Note: Data from Radius+

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The Storage Acquisition Group specializes in purchasing storage facilities and portfolios nationwide. Uniquely, we allow owners to sell direct without having to list their facility. With our 4-tiered approach, Market Analysis, Acquisitions, Underwriting, & Closing Support, The Storage Acquisition Group is able to help owners navigate a simple sales process while netting the highest possible profit.

TSAG Market Analysis: Phoenix & Tucson

By: The Storage Acquisition Group

One of the sunniest areas of the Sun Belt keeps getting sunnier when it comes to self-storage.

According to industry data and officials, the self-storage market in Arizona – and specifically its two largest cities, Phoenix and Tucson — keeps defying the already high expectations, with rental prices increasing at a fast clip despite a sharp spike in new self-storage supply.

The main reasons for the almost unprecedented growth even for a Sun Belt state: A strong economy, a booming population and a red-hot housing market – all of which are generating a huge demand for self-storage. And it doesn’t hurt that many nearby Californians, fed up with high housing prices and taxes, are flocking to Arizona by the thousands each year, according to industry officials.

“We’re busier than ever,” says April Worden, owner and CEO of Brown Worden Properties, owner of 19 self-storage facilities in the Tucson area. “The demand keeps growing. We opened up our 19^th facility last year and it’s already 70 percent occupied.”

The numbers pretty much tell the story for Arizona in general – and the Phoenix and Tucson areas in particular.

According to U.S. Census data, Arizona was the third fastest growing state in America in 2020, with its population jumping by 1.78 percent to 7.4 million people. The nation’s overall population growth in 2020: 0.5 percent.  Indeed, Arizona’s population has grown by 45 percent so far this century, according to U.S. Census data.

And most of that growth is flowing to the Greater Phoenix area, which includes the nearby cities of Scottsdale, Mesa, and Tucson.

The result: An increase in demand for both short-term and long-term self-storage.

With a population of 4.6 million people, the Phoenix area has seen an 18.3 percent increase in self-storage supply over the past three years, to 33 million square feet, according to data from Radius Plus, the research arm of Union Realtime. Meanwhile, the Phoenix area’s penetration rate, or the square feet of self-storage space per capita, is about 6.7, compared to the national average of 5.9.

In other markets, such an increase in supply would lead to a deflation of rental prices, if only briefly, but that hasn’t been the case in Phoenix. Radius Plus data shows Phoenix’s lease prices consistently growing in recent years, hitting about $1.82 per square foot for climate-controlled REIT units and $1.70 in general for all units, as of early April.

“This is a very healthy market,” says Cory Sylvester, a principal at Radius Plus.  Asked if he sees any major negatives about the Phoenix market, Sylvester answered simply: “No. It has a great long-term growth outlook.”

With a population of about 1 million, Tucson’s self-storage market isn’t as hot as the Phoenix market – but it’s very solid by most other standards. It’s seen a supply growth of about 9 percent, to 6.5 million square feet, over the past years, according to Radius Plus data. Meanwhile, its penetration rate is about 6.1, just above the national average.

But Tucson’s rental prices are strong, hovering in the $2.06-per-square-foot range for climate-controlled units, according to Radius Plus data. The interesting thing about Tucson’s market: Many of its units are non-climate-controlled – and yet prices remain at relatively high levels, Sylvester notes.

“Tucson is definitely a growth market, but just not to the same extent as Phoenix,” says Sylvester.

Dylan Stalling, an advisor for The Storage Acquisition Group, says the success of the Phoenix and Tucson markets all come down to the state’s strong economy and booming population – and the huge demand for new housing.

“There’s literally waiting lists of people trying to buy new homes,” he says. “They can’t build them fast enough.”

And that housing demand is leading to more demand for self-storage, as people temporarily store items until they find new homes or as people decide they won’t need as many items in newer multifamily dwellings.

“People are realizing they need more storage space,” says Stalling. “The pandemic and remote-working have also increased the demand for more space. It’s all about demand.”

“With the high housing demand comes the need for more storage solutions,” agrees Whitney Jurjevich, a member of the board at the Arizona Self-Storage Association and owner of Ameripark Covered Storage. “The thought of overbuilding is directly correlated with what is happening in residential. The market is trying to keep up with the demand and much is through multifamily development – meaning those residents need (storage).”

And it’s more than just household and business items needing storage space. Jurjevich, whose firm specializes in RV and boat storage solutions, said his business has seen strong demand for space among outdoor-minded Arizonians. The pandemic – and the recreational desire of people to get outdoors – has only helped demand, he said.

Though industry officials stress that the self-storage fundamentals are strong for both Phoenix and Tucson, they do warn of rising prices – specifically rising labor and construction prices for homes, self-storage facilities and commercial structures in general.

“Materials are getting really expensive,” says Worden of Brown Worden Properties. Jurjevich agrees “It is very frothy right now so prices are elevated for everything.”

Self-storage competition in some areas is also heating up, particularly in the Phoenix area, says Stalling of The Storage Acquisition Group. “The Phoenix area is where a lot of the competition is headed. It’s getting aggressive.”

Still, Stalling and others remain bullish on the Phoenix and Tucson markets – and Arizona as a whole.

“Arizona draws in so many people with its diverse opportunities that cover a wide variety of interests including recreational/outdoor activities, vibrant career opportunities, low cost of living, and an overall high quality of life for many income ranges,” says Jurjevich. “Because of these reasons, it has created many needs to be filled by self storage.”

Greater Phoenix/Scottsdale/Mesa at a Glance

Number of Facilities	542
Total Self-Storage	33M Square Feet
3 Year Growth in Supply	18.3%
Population	4.6M
Penetration Rate	6.7
Median Household Income	$67,363

  Note: Data from Radius+

Greater Tucson at a Glance

Number of Facilities	130
Total Self-Storage	6.5M Square Feet
3 Year Growth in Supply	8.8%
Population	1M
Penetration Rate	6.1
Median Household Income	$52,379

  Note: Data from Radius+

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The Storage Acquisition Group specializes in purchasing storage facilities and portfolios nationwide. Uniquely, we allow owners to sell direct without having to list their facility. With our 4-tiered approach, Market Analysis, Acquisitions, Underwriting, & Closing Support, The Storage Acquisition Group is able to help owners navigate a simple sales process while netting the highest possible profit.

TSAG Market Analysis: Chicago

By: The Storage Acquisition Group

Statistically, the Chicago area sure looks like a desirable self-storage market for developers, investors, and owners alike.

The Chicago metropolitan region has one of the largest and most diverse populations in the nation. It has one of the lowest self-storage penetration rates. Its demographics are generally excellent, particularly its suburbs, with high median household incomes.

But all is not well in Chicagoland.

“We’re not touching anything new there with a ten-foot pole,” says Bob Soudan, a partner at Lock Up Self Storage, the Northfield, Illinois-based owner, and manager of about 45 self-storage facilities in eight states around the country, seven of them in Chicago and 12 in the city’s suburbs

The problem: High property taxes in Cook County – mixed with burdensome zoning and building regulations that many say stifle new construction, conversions, or expansions of current facilities.

How high are Cook County’s property taxes? Nearly quadruple the rates in Florida, where Lock Up Storage also does business, Soudan says.

Property taxes aren’t as high in non-Cook County suburbs. But they’re still high by national standards. Indeed, all of Illinois is considered the second least “tax-friendly” state in the nation due to its high taxes, according to a recent report by Kiplinger.

Not everyone feels as strongly as Soudan. They say every market has its challenges – and savvy investors just have to be more be careful in the general Chicago metropolitan area.

Back to the statistics. Yes, the Chicago area is indeed seemingly attractive.

The Chicago/Naperville/Elgin area’s self-storage penetration rate, or the square footage of self-storage space per capita, is only 4.7, well below the national average of 5.8 and considered an attractive figure for those considering building or buying in the area, according to data from Radius Plus, the research arm of Union Realtime.

The Chicago area also hasn’t experienced a tremendous building boom in recent years, with only an 8.5 percent increase in overall supplies over the past three years, according to Radius Plus.

Prices in the region remained remarkably steady in the immediate years prior to last year’s onset of the pandemic, which caused wild fluctuations in prices across the county in 2020, including in the Chicago area. Nationally, prices shot up late last year due to the increased demand for self-storage space caused by the economic downturn.

In the months leading up to the pandemic, prices for 10-foot-by-10-foot, climate-controlled units in the Chicago area were going for about $100. This past winter, prices were hovering in the $137 range, according to Radius Plus.

Meanwhile, the occupancy rate for Chicago-area facilities owned and/or managed by major REITs is currently hovering around 95 percent, according to Radius Plus data.

But some of those solid statistics also raise questions. Why hasn’t there been a building boom in Chicago? Why are some owners and investors, though certainly not all, down on the Chicago market?

There seems to be an almost love-hate relationship going on in Chicagoland – and it all comes down to taxes and regulations.

“On the surface, there should be a lot of good development opportunities in the Chicago area, especially in the outer suburbs,” says David Spencer, a vice president and senior advisor at The Storage Acquisition Group. “But the Chicago area is facing challenges – challenges that you may not experience in other markets that offer the same or better upside. The tax burden, in particular, can really complicate the financials on projects in Cook County”

Cory Sylvester, a principal at Radius Plus, agrees that there’s a sense the Chicago market is underperforming – when it could be, and should be, performing much better, at least based on the statistics.

“There’s a lot of stagnation in the market,” says Sylvester, noting the region’s population growth has also fallen in recent years. “The high property taxes create vulnerabilities for businesses.”

As the data shows, there has been construction in the Chicago area, mostly in the outer suburbs – and it has led to some pricing pressures. Like in other areas of the nation, construction in the Chicago area has slowed considerably since the pandemic – and today facilities currently under construction would only add about 1 percent to the Chicago area’s overall supply of 44.8 million square feet of self-storage space.

In the suburbs, there seems to be a healthy amount of competition among REITs, mid-size and small self-storage operators, industry officials agree.

The Storage Acquisition Group’s Spencer warned that people shouldn’t get too pessimistic about the metropolitan Chicago area.

“It’s a massive, massive market, both regionally and nationally,” he said. “There are a lot of good opportunities there. But you have to look for them carefully. There are excellent opportunities if you do the research.”

Greater Chicago at a Glance

Number of Facilities	891
Total Self-Storage	44.7M Square Feet
3 Year Growth in Supply	8.5%
Population	9.5M
Penetration Rate	4.7
Median Household Income	$74,292

  Note: Data from Radius+

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The Storage Acquisition Group specializes in purchasing storage facilities and portfolios nationwide. Uniquely, we allow owners to sell direct without having to list their facility. With our 4-tiered approach, Market Analysis, Acquisitions, Underwriting, & Closing Support, The Storage Acquisition Group is able to help owners navigate a simple sales process while netting the highest possible profit.

TSAG Market Analysis: Greater Detroit

By: The Storage Acquisition Group

Hollywood has its view of Detroit – and then there’s the self-storage industry’s view of Detroit.

In many movies, Detroit, the once mighty Motor City, is portrayed in almost post-apocalyptic terms – a desolate, dilapidated city gutted by the long and painful decline of the U.S. auto industry. It isn’t a flattering image.

But talk to local self-storage industry folks and they see a hard-scrabble city in the early stages of a comeback, surrounded by solid and affluent suburbs, and in a state steadily diversifying its overall economy. It’s a much more flattering image.

“We’re doing all right,” says Peter Spickenagel, CEO of Citizen Storage and president of the Self-Storage Association of Michigan. “Detroit isn’t a market going like gangbusters, but things are pretty good. Things are definitely improving.”

And the data seems to back up Spickenagel and others’ view of the Greater Detroit market, as well as the southern Michigan market in general.

Though the industry isn’t expanding as fast as in other parts of the country, Greater Detroit’s supply of new self-storage facilities has grown by about 7 percent over the past three years, indicating slowly growing investor confidence in the region, according to data from Radius Plus, the research arm of Union Realtime.

Meanwhile, the region’s self-storage rental prices remained remarkably steady in the years and months immediately leading up to the COVID-19 outbreak, hovering in the $110 range for a 10-by-10-foot climate-controlled unit, Radius Plus data shows.

Jonathan Spencer, an advisor at Storage Acquisition Group, agrees Detroit is showing signs of improvement. “There is an overall feeling of optimism from owners in the Detroit market and across the state of Michigan,” says Spencer.

Like other metropolitan markets across the nation, the Detroit area saw a steep fall in rental prices in the months after the onset of the pandemic last winter, followed by a strong surge in prices in the second half of 2020. As of early February, the Detroit area’s rental prices were hovering in the $138 range, a solid figure, says Cory Sylvester, a principal at Radius Plus.

The increasing demand for self-storage space, spurred by the pandemic-caused economic downturn, and rising prices are encouraging signs for the Detroit area, said Sylvester.

Part of the reason for Greater Detroit’s somewhat encouraging pricing is the fact that it has one of the lowest self-storage penetration rates in the county, or 4.4 square feet of space per capita, compared to the national rate of nearly 6, according to Radius Plus data. In all, the Detroit-Warren-Dearborn metro area has about 19.9 million square feet of self-storage space.

“We’re probably one of the most underbuilt markets in the nation,” says Adam Pogoda, a principal at the Pogoda Companies, owner and operator of 51 self-storage facilities in Michigan, running under the National Storage Centers brand.

The region’s low self-storage supply – and increasing pandemic-era demand for space – has been a boon to existing facility owners.
And the supply-and-demand imbalance is starting to attract attention, as more investors start to reassess the region’s long-term prospects. Pogoda said his firm was just recently outbid by a real estate investment trust (REIT) for one property.

“It’s getting more competitive,” he said. “It’s not like Nashville or Dallas, but it’s growing.”

Competition is getting stiffer in the Detroit area – and it’s not all coming from REITs. Seeing the potential for growth, local players are also aggressive in the market, especially in Detroit’s attractive suburban communities.

“Working with the local players and having intimate knowledge of the market is key. Following the trends within the REIT’s is important, but understanding the Detroit owners is the best way to know what is happening in a market” said Spencer, describing the market as “generally strong.”

Storage Center’s Spickenagel says the region has become “very competitive” in recent years.

As for the city of Detroit itself, some of its negative image is well placed. The city’s urban core was indeed devastated by the decades-long decline of the U.S. auto industry, a decline exacerbated by what many consider poor political leadership in the past.

But Spickenagel, Pogoda, and others say there are encouraging redevelopment projects underway today in downtown Detroit, with new residences, commercial and nonprofit structures being built. Old abandoned buildings are also being converted.

Detroit is far from becoming a fully rejuvenated, post-industrial northern city, but progress is happening. “We’re not close to really coming back, but the signs are good,” says Spickenagel.

“It bodes well for the future of self-storage in the area,” adds Pogoda of the city’s slow rebound.

Storage Acquisition Group’s Spencer agrees. If the self-storage business eventually picks up in downtown Detroit, then “you’re looking at a pretty solid market” in the long-term.

And the city’s slow recovery is occurring as southern Michigan as a whole is doing better as well, both in terms of the self-storage industry and the economy in general.

“Our rentals are up,” says Chad Lundberg, managing partner of the Storage Group in Muskegon, Michigan, on the western side of the state, along Lake Michigan and a three-hour drive from Detroit. Lundberg, whose company owns 14 self-storage facilities, said Michigan as a whole has become “economically more diverse and resilient” than it was in recent decades.

“One of the great things about the Michigan economy is that it’s diversifying away from the auto industry,” says Pogoda.

“The general consensus is that Detroit has room for more self-storage inventory. Owners are now taking the opportunity to make improvements to their existing facilities and/or expand their self-storage holdings through acquiring local existing facilities,” says Spencer

As for Greater Detroit, no one is saying it’s about to become the next fast-growing Austin, Texas or Denver. “It’s not an extraordinarily dynamic market,” said Sylvester of Radius Plus. “But there are encouraging signs and, if it’s sustained, it looks good for the self-storage industry.”

Greater Detroit at a Glance 

Number of Facilities	378
Total Self-Storage	19.9M Square Feet
3 Year Growth in Supply	7%
Population	4.3M
Penetration Rate	4.49
Median Household Income	$61.995

  Note: Data from Radius+

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The Storage Acquisition Group specializes in purchasing storage facilities and portfolios nationwide. Uniquely, we allow owners to sell direct without having to list their facility. With our 4-tiered approach, Market Analysis, Acquisitions, Underwriting, & Closing Support, The Storage Acquisition Group is able to help owners navigate a simple sales process while netting the highest possible profit.

TSAG Market Analysis: Providence, RI

By: The Storage Acquisition Group

Providence, R.I.’s self-storage market packs a punch

No one is going to confuse Providence, Rhode Island anytime soon with a fast-growing Sunbelt city.

But the New England city of nearly 180,000 people and capital of the country’s geographically smallest state definitely punches above its weight class when it comes to self-storage markets, according to industry officials.

Providence, home to the Ivy League’s Brown University and perennial NCAA basketball and hockey contender Providence College, has seen a recent boom in new self-storage construction, with more than 1 million square feet added to the general market in recent years. Last year alone, the area’s new supply increased by 11 percent, bringing its total supply to 5.9 million square feet, according to Radius Plus.

And yet rental prices in Providence – and throughout the entire state of Rhode Island, for that matter – have remained relatively stable in recent years, hovering around $130 for 10-foot-by-10-foot climate-controlled units.

Why no big fall in prices with the added supply?

Partly because the Providence/Warwick region, as many people describe the general Providence metropolitan area, has traditionally been an underserved region when it comes to self-storage, with its square feet of space per capita at less than 4 percent. The nation’s penetration rate is about 5.8 percent.

Also, the Providence area’s population has been slowly growing of late, as people priced out of the nearby Boston and New York markets look for less expensive housing in smaller Northeast cities, such as Providence.

The bottom line: Demand for self-storage space has increased in recent years in the Providence area – enough demand to absorb recent new supply.

“It’s not a super high-growth market, but it’s a very solid market,” says Cory Sylvester, a principal at Radius Plus. “It’s been very resilient based on the amount of new supply it’s seen. Rates are still healthy.”

Thomas Palumbo, advisor for The Storage Acquisition Group and senior director at Sitar Realty Co., says the Providence area has its market negatives, including the fact it’s considered a “high barrier” region due to strict zoning laws and the high cost of land.

But its pluses – which include the state’s well-regarded education system, high median household incomes, and the proximity to Boston and New York – make it an attractive market for new residents and potential self-storage customers. And therefore it’s an attractive market for self-storage investors as well.

“The key is: If you can get into the market, it’s a very good place to invest,” said Palumbo.

Indeed, the entire state of Rhode Island — with a population of 1 million people living in relatively densely packed communities — is attractive to self-storage renters, owners, and investors alike.

The scenic city of Newport, located at the southern mouth of the Narragansett Bay, has self-storage rental prices hovering in the $1.80 to $1.90 per-square-foot range, according to Radius Plus’s Sylvester.

“We just love Rhode Island,” said Sarah Harris, director of acquisitions at Bluedog Capital Partners, which owns two self-storage facilities in the Rhode Island towns of Cranston and Wakefield. “It’s still an undersupplied state and there’s strong demand.”

Harris said it’s definitely gotten more competitive in Rhode Island in recent years, as major real estate development trusts (REITs) and others have jumped into the market. “It’s starting to attract more players,” she said.

Utah-based Wasatch Storage Partners is currently building a nearly 70,000-square-foot facility in Providence, with plans to have it operated by a third-party manager.

“To us, it looks like an attractive market,” Wasatch’s Parley Vernon, an investment associate at Wasatch, said of the Providence area.

As the Providence market slowly grows both in popularity and population, the question arises:

Is it getting too popular?

Economically, Rhode Island got hit hard by the 2008 Wall Street meltdown and subsequent recession, taking years for the region to recover. Little or no new self-storage construction occurred in the Providence area early last decade, according to data.

But then construction started to take off in late 2017, culminating in 450,000 square feet of completed construction in the fourth quarter of 2020 alone. Yet, the Providence area still saw a 3.1 percent year-over-year gain in rent prices.

As for future construction, current owners can breathe a sigh of relief, at least for now. Facilities currently under construction would add only about 1.8 percent to the Providence region’s overall supply, a manageable increase, says Radius Plus’s Sylvester.

Providence, Rhode Island at a glance

Population	179,494 (1M in RI)
Total Self-Storage	5.94M Square Feet
3 Year Growth in Supply	19.7%
Penetration Rate	3.7
Median Household Income	$68,498
Number of Households	701,870
Renter Occupied Households	244,561

  Note: Data from Radius+

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