TSAG Market Analysis: Vancouver

TSAG Market Analysis: Vancouver

By: The Storage Acquisition Group

Vancouver - Canada

Vancouver is considered one of best self-storage markets for investors in North America; that is if you can find an affordable property to buy or build upon.

As Canada’s third-largest city, Vancouver, has been booming in recent decades. With the population of the British Columbia metropolis, located just north of the U.S. border along the Pacific Rim, increasing by 500,000 since 2000 and by nearly a million people since 1990.

Not surprisingly, the housing market has been on fire, as new multifamily towers and other dwellings are built, sold, and leased at an expeditious pace to meet the growing demand of the region’s now 2.4 million residents. All of the growth has been very good for self-storage operators in Vancouver.

“A lot of micro-sized apartment buildings are going up and they offer very little in the way of storage for tenants or owners,” says Hugh Cartwright, co-founder, and chairman of Vancouver-based Nationwide Self Storage. “So, outside of the standard users such as the four D’s (Death, Divorce, Downsizing or Dislocation), everyone needs to store camping equipment, sporting equipment, like skis and hockey gear, and Christmas stuff or small business inventories.”

As a result of that demand, self-storage occupancy rates and rent prices are high in Vancouver.  Radius Plus reports prices for some 10-by-10 storage units in the Vancouver area are now hovering in the $366 (Canadian dollars) range, or about $290 in U.S. dollars. Those are eye-popping dollar figures in either currency.

Sure, demand for storage in Vancouver is strong, but when it comes to why occupancy and rental rates are so high there is more to the story than increasing population. The supply of storage space is very low in Vancouver, at least by U.S. standards.  Low supply and high demand – that’s where it gets challenging for investors.

With about 5.8 million square feet of self-storage space in the region, Vancouver’s self-storage penetration rate – or the amount of square feet of storage per capita – is about 2.4, less than half the U.S. rate of 6, according to Radius Plus. The Vancouver metro area has only about 114 storage facilities, averaging about 52,000 square feet in size.

Vancouver’s self-storage penetration rate is actually in line with the rest of Canada, which traditionally has had fewer storage units per capita compared to the U.S. There are a number of reasons cited for Canada’s lack of storage facilities, including the fact Canadians don’t pick up and move from region-to-region as often as Americans.

In the case of Vancouver, there’s another reason: lack of available, and affordable, land. The scenically beautiful Vancouver area is hemmed in by water, mountains, and the U.S. border.  Available land is hard to find, says Robert Madsen, president of U-Lock Mini Storage and President of the Vancouver Island Self Storage Association.

“Land is very expensive – and when you do find available land it usually goes to someone else who plans to use it for a different purpose and can pay more,” he says, noting Vancouver’s voracious appetite for more housing.

In fact, Vancouver is considered the most densely populated city in Canada, with a large number of multi-family residential towers packed into a relatively small area, according to published reports.

Besides the lack of available and affordable land, construction prices in Canada are higher than in the U.S.  Then there’s the, oftentimes daunting, zoning and building restrictions that add to the woes of developing new facilities in Vancouver.

Combine everything together – lack of land, high land and construction costs, and regulatory hurdles to building – and you have “sheer frustration” when it comes to new construction, says Madsen.

While there are high barriers to building in Vancouver, there are also high barriers to buying in Vancouver, as well as in other Canadian cities. The main barrier: the country’s high capital gains tax that discourages existing facility owners from selling.

“The capital-gains tax makes people think twice about selling,” says Lloyd McDonald, director of Canadian acquisitions for The Storage Acquisition Group. “When talking to owners of self-storage facilities, the tax question comes up quite often.”

The bottom line, says McDonald, is that owning self-storage facilities in Vancouver is an “unequivocally good investment” – but cracking into that market is hard.

There is new construction under way in the Vancouver area. According to Radius Plus, the current projected supply pipeline would add about 2.9 percent to the region’s total square footage of self-storage space, increasing Vancouver’s penetration rate to about 2.52.

But that supply increase probably won’t be enough to meet demand, especially if Vancouver remains a popular magnet for newcomers, particularly immigrants from Asia. Besides its natural beauty, Vancouver is seen as a culturally sophisticated and cosmopolitan city, consistently ranking high on travel lists as one of the more attractive and “livable” cities in the world.

“Vancouver is such a unique place,” says McDonald. “It really feels like a different country. I love going and staying there.”

Vancouver’s attractiveness makes it a “very positive” long-term bet for investors, says Cory Sylvester, a principal at Radius Plus. “Its housing market is hot. Obviously, housing growth helps storage.”

Nevertheless, U-Lock Mini Storage’s Madsen warns there are plenty of “if” caveats when it comes to investing in the Vancouver region.

“The big “ifs” are if you can find a place to buy or if you can find a site to build,” he says. “Vancouver is a great market, but it’s a very challenging market”.

Greater Vancouver at a Glance

Population 2.4M
Square Feet of Storage Space 5.8M
Number of Storage Facilities 114
Storage Per Capita 2.4
Percentage of renter occupied dwellings 34%

  Note: Data from Radius+, industry officials

The Storage Acquisition Group logo

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.

Understanding the Real Estate Transaction

Understanding the Real Estate Transaction

By: Monty Spencer, CEO

Business network concept. Customer support. Shaking hands.

Although negotiation times vary, there are principal steps that occur as part of the real estate transaction that parties involved can expect to see.

To begin, the buyer and seller must agree upon a realistic, market-supported starting point for price negotiations.  Both parties should be amenable to a confidentiality agreement before exchanging proprietary information.  The buyer must be prepared to provide the seller with a list of reports/information needed in order to perform a thorough evaluation of value. Both buyer and seller should be clear about any extenuating circumstances that may require an adjusted transaction timeline such as tax considerations, third-party inspector availability, financing issues.  The buyer should provide the seller with an LOI or a PSA. Once provided, the seller should consult with an attorney and counter with any desired changes in order to begin a formal negotiation. Once terms are agreed upon, both parties sign, and buyer deposits earnest money as outlined in the PSA. At this time, the process would move to the due diligence period.

Sellers should expect a due diligence period of 30-60 days followed by a closing period of 30 days.  During the due diligence period, sellers should expect the following: 

Seller’s number one priority should be to continue running their business as efficiently as possible throughout the sales process.  Sellers should gather and organize 12 months of financials, operational reports, bank statements, rent rolls, surveys, environmental reports, approved building/zoning plans, list of major improvements.

Additionally, the seller will need to provide access to the buyer and their third-party vendors to complete their due diligence. In most cases, terms regarding access, notice, and confidentiality will have already been addressed in PSA negotiations.  The seller should begin focusing on a transition plan for staff, utilities, vendor accounts, equipment, and items that will not convey with the sale.

Buyers have their own set of responsibilities when transitioning into the due diligence period.  Buyers are expected to do the following: 

Regarding the buyer’s financing (if any), the buyer should have all the required debt and equity lined up and committed.  Further, the buyer should perform a thorough review of the facility’s financial and operating reports or have someone lined up who can perform such an evaluation within the constraints of the due diligence period.

The buyer should have third-party vendors vetted and booked to perform any required consultations. Not only must the visits be performed within the due diligence period, but the buyer must allow themselves time to review any returned reports.  The buyer should have a clear understanding of the criteria they hope to find after performing their financial and operational reviews.

The goal is to have a simple and seamless sales process that avoids potential problems and delays.  To avoid problems, parties should consider the following: 

Both the buyer and the seller should have a contingency plan and know where they are willing to compromise should unknown problems arise.  It is essential for both parties to do their homework and understand market conditions. Taking the time to research the market including sales comparables, rental summaries, and development pipelines will pay off when it comes time to negotiate a price.

As for transaction times, they can range from 60 days to 120 days (without complications).  To avoid frustration, both parties should begin by setting clear guidelines and taking the time to make sure essential items have been addressed.

Transparency by both parties is key to a successful transaction.  Both buyer and seller have a vested interest in completing the transaction. If either side experiences an unforeseen challenge, it is highly likely both sides will want to come together to find a solution and salvage the transaction.  Having realistic expectations and goals when presented with delays in the process will allow both parties to work together more efficiently.

As seen in other industries, commercial real estate has noted trends that impact change in the market and transactions 

Recently, Covid 19 has created challenges for owners that slowed transactions.  Moratoriums on raising rents and evictions altered the outlook of many facilities and affected the ability to provide accurate reporting to initiate a sale.  2021 has proved to reverse some of this and shown the resiliency of self storage.

The exuberance of investors who focus on this market sector has increased over recent years.  The self storage industry has proved to be an effective hedge on investment dollars for companies and individuals looking for a recession-resistant way to invest their capital.

Proposed tax changes may have a significant impact on the urgency to enter into a real estate transaction.  With the uncertainty surrounding capital gains, set up in basis, and 1031 exchange options, sellers may choose to expedite future liquidation plans.

The best advice that could be given to buyers and sellers is:

  • Set realistic expectations
  • Be willing to do the homework
  • Prepare for and be patient through unforeseen challenges
  • Bring integrity and transparency to your transaction
Monty Spencer

Cowles M. “Monty” Spencer, Jr. serves as The Storage Acquisition Group’s President & CEO. Monty is an accomplished real estate executive with over 20 years of commercial real estate experience. He has won numerous CoStar® Power Broker of the Year and Commercial Real Estate Council Awards, as well as winning the Deal of the Year Award & Broker of the Year Awards for three consecutive years. Distinguished throughout the industry for developing dozens of high-profile retail projects, Monty has brought his unique blend of expertise and ambition to spearheading The Storage Acquisition Group. He received his BA from the University of Mississippi in Business Administration & Marketing.

TSAG Market Analysis: Las Vegas

TSAG Market Analysis: Las Vegas

By: The Storage Acquisition Group

Panoramic view of Las Vegas Strip at night in Nevada

Las Vegas has become a very good bet for self-storage owners and an increasing number of investors looking to jump into the Nevada market.

Though Greater Las Vegas has seen a substantial uptick in new self-storage construction in recent years, Nevada’s largest metropolitan area hasn’t experienced major price volatility.  Although other cities have endured price unpredictability with new facilities suddenly coming online, Vegas’s growing population has kept demand high for self-storage in the market.

“It’s been a great market,” says Cory Sylvester, a principal at Radius Plus, the research arm of Union Realtime, the self-storage data analytics company. “Las Vegas has been a big beneficiary of net migration, a lot of it coming from California.”

Indeed, Sin City, known for its bright lights and the high hopes of gamblers flocking to its famed casinos, isn’t the only metro area booming these days in Nevada.

Reno, the state’s third-largest city located in northwest Nevada, has seen its population spike by about 18 percent over the past ten years, to about 266,500 people. New residents keep coming into Reno, and surrounding areas, often from nearby California.  California’s taxes and cost-of-living are much higher than in Nevada, which doesn’t have a state income tax.

“There’s a lot of building going on, but it’s not overbuilding,” says Todd Whear, owner of Stor-All, referring to the suburban self-storage market in northern Nevada. “It’s needed construction due to high demand. It’s all demand-driven.”

Whear, vice president of the Nevada Self-Storage Association, owns five facilities in northern Nevada, with its headquarters located an hour south of Reno, and is adding 35,000 square feet at two facilities as a result of the strong demand.

In the Las Vegas area, there’s most definitely a boom in both population and the demand for more housing – and thus the need for more self-storage space has spiked.

With 276 facilities and 17.9 million square feet of self-storage space, the Las Vegas-Henderson-Paradise region has a penetration rate, or the amount of square feet of self-storage space per capita, of about 8.3, just a little higher than the national average, according to Radius Plus data.

Currently, there are about 29 facilities in the development pipeline, which could add 12.4 percent to the Las Vegas region’s total supply of self-storage space, according to Radius Plus. But Sylvester of Radius Plus says the area should be able to absorb new space.

“People know it’s a healthy market and that’s why it’s attracting investors,” says Sylvester.

There has indeed been some price unpredictability of late, with climate-controlled prices falling from around $2.30 per square foot in early July to $1.79 per square foot in early August. But prices are still way up from the pre-pandemic average of around $1.20 per square foot, data shows.

Meanwhile, the occupancy rate in the Las Vegas area has continued to hover at around 95 percent.

“Las Vegas is a very dynamic market,” says Gary Free, president, and CEO of Towne Self Storage, which has seven facilities in the Las Vegas area, in addition to about 20 other facilities in Utah and Arizona. “Things got a little difficult during the pandemic last year, but currently we’re doing quite well. Rents have been going up.”

Free noted that all segments of commercial real estate, not just self-storage space, seem to be doing well these days in Las Vegas.

Despite the vibrant nature of the Las Vegas market, Free, whose firm develops self-storage facilities, said investors still have to do their research in order to succeed in the region. Some of the risk factors include the state of the still fragile national economy, inflation, and overbuilding in certain sections of the region.

“You have to be very careful because it’s easy for an area to get overbuilt,” says Free. “But we’re pretty happy right now.”

Dylan Stallings, an advisor for The Storage Acquisition Group, said he’s impressed with the rents that storage facilities have been getting of late in the Las Vegas area, noting they’re now hovering just shy of $1.30 per square foot. The reason for the strong price trends: The region’s growing population, Stallings said.

According to U.S. Census data, Las Vegas’s population has increased by about 14 percent over the past ten years, to about 667,500 people.

Meanwhile, the city of Henderson, just south of Las Vegas, has seen an eye-popping 32 percent increase in population since 2010, to about 341,500 residents. All of those new residents need new housing – and self-storage space that’s associated with people on the move.

“There’s definitely a lot of people moving out of California and feeding into Nevada,” says Stalling.

As for potential overbuilding, Stalling said it’s a concern, but not a big concern, considering the growing demand for space in the Las Vegas region. “If rent trends continue, new construction shouldn’t be a problem,” says Stalling.

The bottom line: Las Vegas area is considered a “very healthy market” in the long run, says Stalling.

Steve Kramer, president of the Nevada Self Storage Association, agrees that Las Vegas is a good long-term bet for investors – as long as the market doesn’t get too hot and overbuilt. “Oversaturation is the only thing I worry about,” he said.

Greater Las Vegas at a Glance

Number of Facilities 276
Development Pipeline 29 Facilities/12% of Supply
Population 2.2M
Penetration Rate 8.3
Median Household Income $60,909
Percentage of renter-occupied dwellings 41%

  Note: Data from Radius+, industry officials

The Storage Acquisition Group logo

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.

Storage Partners-Surfside – Surfside Beach, SC

Storage Partners-Surfside- Surfside Beach, SC

By: The Storage Acquisition Group

Surfside-Ziff

The Storage Acquisition Group (TSAG) is pleased to announce the closing of Storage Partners-Surfside. The facility is located at 610 Highway 17 N Business.   Storage Partners-Surfside, operating as an Extra Space, offers 60,295 net rentable square feet across 647 units.  The facility offers both climate and non-climate-controlled space, 58 parking spaces, and is conveniently located on 6.39 acres of land.

The transaction was negotiated by David Spencer, Vice President and Senior Advisor with The Storage Acquisition Group and Executive Advisor with Spencer Commercial Group (based in Decatur, GA, and brokered by eXp Commercial) and TSAG CEO & President Cowles M. “Monty” Spencer, Jr.

The Storage Acquisition Group specializes in purchasing storage facilities and portfolios nationwide.   Uniquely, they allow owners to sell direct without having to list their facility. With their 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.

Storage Partners-Spartanburg – Spartanburg, SC

Storage Partners-Spartanburg – Spartanburg, SC

By: The Storage Acquisition Group

Spartanburg-Ziff

The Storage Acquisition Group (TSAG) is pleased to announce the closing of Storage Partners-Spartanburg. The facility is located at 240 Cedar Springs Road.   Storage Partners-Spartanburg, operating as a CubeSmart, offers 43,022 net rentable square feet across 504 units.  The facility offers both climate and non-climate-controlled space, 23 parking spaces, and is conveniently located on 3.56 acres of land.

The transaction was negotiated by David Spencer, Vice President and Senior Advisor with The Storage Acquisition Group and Executive Advisor with Spencer Commercial Group (based in Decatur, GA, and brokered by eXp Commercial) and TSAG CEO & President Cowles M. “Monty” Spencer, Jr.

The Storage Acquisition Group specializes in purchasing storage facilities and portfolios nationwide.   Uniquely, they allow owners to sell direct without having to list their facility. With their 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.

Taylors Storage – Taylors, SC

Taylors Storage – Taylors, SC

By: The Storage Acquisition Group

Taylors-Ziff

The Storage Acquisition Group (TSAG) is pleased to announce the closing of Taylors Storage. The facility is located at 3146 Wade Hampton Boulevard.   Taylors Storage, operating as an Extra Space, offers 51,064 net rentable square feet across 446 units.  The facility offers both climate and non-climate-controlled space, 87 parking spaces and is conveniently located on 11.23 acres of land.

The transaction was negotiated by David Spencer, Vice President and Senior Advisor with The Storage Acquisition Group and Executive Advisor with Spencer Commercial Group (based in Decatur, GA, and brokered by eXp Commercial) and TSAG CEO & President Cowles M. “Monty” Spencer, Jr.

The Storage Acquisition Group specializes in purchasing storage facilities and portfolios nationwide.   Uniquely, they allow owners to sell direct without having to list their facility. With their 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.

Ziff Tallahassee Storage LLC – Tallahassee, FL

Ziff Tallahassee Storage LLC – Tallahassee, FL

By: The Storage Acquisition Group

Tallahassee-Ziff

The Storage Acquisition Group (TSAG) is pleased to announce the closing of Ziff Tallahassee Storage LLC, a self storage facility located at 2428 North Monroe Street, Tallahassee, FL.   Tallahassee Storage, operating as a CubeSmart, offers 54,171 net rentable square feet across 550 units.  The facility offers both climate and non-climate-controlled space, 12 parking spaces and is conveniently located on 2.69 acres of land.

The transaction was negotiated by David Spencer, Vice President and Senior Advisor with The Storage Acquisition Group and Executive Advisor with Spencer Commercial Group (based in Decatur, GA, and brokered by eXp Commercial) and TSAG CEO & President Cowles M. “Monty” Spencer, Jr..

The Storage Acquisition Group specializes in purchasing storage facilities and portfolios nationwide.   Uniquely, they allow owners to sell direct without having to list their facility. With their 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.

Absolute Simpsonville LLC – Simpsonville, SC

Absolute Simpsonvile LLC – Simpsonville, SC

By: The Storage Acquisition Group

Simpsonville-Ziff

The Storage Acquisition Group (TSAG) is pleased to announce the closing of Absolute Simpsonville LLC, a self storage facility located at 412 Scuffletown Road, Simpsonville, SC.   Absolute-Simpsonville SS, operating as a CubeSmart, offers 70,455 net rentable square feet across 629 units.  The facility offers both climate and non-climate-controlled space, 34 parking spaces and is conveniently located on 6.47 acres of land.

The transaction was negotiated by David Spencer, Vice President and Senior Advisor with The Storage Acquisition Group and Executive Advisor with Spencer Commercial Group (based in Decatur, GA, and brokered by eXp Commercial) and TSAG CEO & President Cowles M. “Monty” Spencer, Jr.

The Storage Acquisition Group specializes in purchasing storage facilities and portfolios nationwide.   Uniquely, they allow owners to sell direct without having to list their facility. With their 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.

Mountain Creek Storage – Chattanooga, TN

Mountain Creek Storage – Chattanooga, TN

By: The Storage Acquisition Group

Mountain Creek-Ziff small

The Storage Acquisition Group (TSAG) is pleased to announce the closing of Mountain Creek Storage in Chattanooga, TN. The facility is located at 816 Mountain Creek Road.   Mountain Creek Storage, operating as a CubeSmart, offers 59,075 net rentable square feet across 685 units.  The facility offers both climate and non-climate-controlled space, 48 parking spaces and is conveniently located on 4.94 acres of land.

The transaction was negotiated by David Spencer, Vice President and Senior Advisor with The Storage Acquisition Group and Executive Advisor with Spencer Commercial Group (based in Decatur, GA, and brokered by eXp Commercial) and TSAG CEO & President Cowles M. “Monty” Spencer, Jr.

The Storage Acquisition Group specializes in purchasing storage facilities and portfolios nationwide.   Uniquely, they allow owners to sell direct without having to list their facility. With their 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.

Lexington Storage LLC – Lexington, KY

Lexington Storage LLC – Lexington, KY

By: The Storage Acquisition Group

Lexington-Ziff

The Storage Acquisition Group (TSAG) is pleased to announce the closing of Ziff Lexington Storage LLC in Lexington, KY. The facility is located at 527 Angliana Avenue.   Lexington Storage, operating as a CubeSmart, offers 54,140 net rentable square feet across 567 units.  The facility offers both climate and non-climate-controlled space, 20 parking spaces and is conveniently located on 3.55 acres of land.

The transaction was negotiated by David Spencer, Vice President and Senior Advisor with The Storage Acquisition Group and Executive Advisor with Spencer Commercial Group (based in Decatur, GA, and brokered by eXp Commercial) and TSAG CEO & President Cowles M. “Monty” Spencer, Jr.

The Storage Acquisition Group specializes in purchasing storage facilities and portfolios nationwide.   Uniquely, they allow owners to sell direct without having to list their facility. With their 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.