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Excessive Supply: Compressed Rental Rates & Extended Lease-up Time

Excessive Supply:  Compressed Rental Rates & Extended Lease-up Time

By: Monty Spencer, CEO, Senior Advisor

Steel frame structure

A developer builds a new storage facility in a hot market, but it takes longer than expected to lease up causing rental prices to be lowered and the property value to drop.

What happened? Typically, the challenge is due to: Lack of Due Diligence. The failure to properly drill down into market data can cause a seemingly good investment to become an unprofitable one.  Excessive-supply problems have cropped up across the country leading to slower lease-ups, compressed rental rates, and lower property valuations.

Besides an immediate drop in operating income, excessive supply impacts CAP rates for property owners in oversupplied markets. Oversupply can hurt everyone in a given market – not just developers of new facilities — and it’s important to recognize the signs and stages of how this unfolds. A reckoning is occurring in many over-developed markets and will continue as long as developers don’t recognize the warning signs.

I want to stress: 

Not all oversupplied markets are the same.

The Atlanta market, for instance, has seen a 14% increase in self-storage supply over the past three years, a major jump that should raise alarm bells for new-construction developers. Yet, the Atlanta area is a dynamic, fast-growing region that can absorb new supply more readily than other markets.

The Philadelphia area has seen an 18.5% increase in supply over the past three years and its population isn’t growing nearly as fast as Atlanta’s population. Yet, Philadelphia’s self-storage penetration rate – or the square feet of space per capita – is much lower than the national average, and therefore it can absorb some new supplies in certain areas.

Still, other markets, such as Charleston, S.C. (25% supply growth over three years in an already overbuilt market), have seen a flat-out frenzy of development and in many cases, the developers have completely ignored the market dynamics which clearly suggested that new projects would face significant headwinds to reach full stabilization and full market rent.

These developers usually go through stages of denial:

— ‘It won’t happen to me’ – Developers who at the outset hope that their new property will be an outlier and not be affected by the market dynamics which are obvious from the inception of a project. They’re almost invariably proven wrong in the end.

— ‘I can always sell at pre-construction proformas’ – This often happens soon after a developer starts to nervously realize a new facility is yielding less cash flow than estimated – and thinks another investor will ride to the rescue and buy at estimated pre-construction levels.

‘I’ll stick it out’ –Many developers who stubbornly hold to the belief that the new normal is not applicable to them and stick it out for quite a while. But even when a facility reaches 80% or higher occupancy, it still doesn’t translate to an expected cash flow — due to slashed rental rates — that will provide a purchaser the income needed to justify an asking price.

Sometimes, the only hope for these developers is that a city or town will place a moratorium on new construction, capping overall supply while demand catches up. Understanding a market is more than believing you know the outcome of a development.   While being familiar with the market you are developing is helpful, financially successful developments typically combine local knowledge with a comprehensive market study to determine the viability of each project.  Researching, analyzing, and understanding the empirical data is the only successful approach.


Monty SpencerCowles 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: Philadelphia

TSAG Market Analysis: Philadelphia

By: The Storage Acquisition Group

Drone view on the Philadelphia Skyline

The relatively stable Philadelphia-area self-storage market could be in for some turbulence soon due to an expected influx of new facilities into the region, according to data from a leading industry research firm.

Not all areas of the Philadelphia metropolitan area – which includes southeastern Pennsylvania, southwestern New Jersey and parts of northern Delaware – are seeing a sharp uptick in new supplies of self-storage facilities.

But downtown Philadelphia and other parts of the city now have approximately 50 percent more self-storage space either in the planning or construction stage, meaning the region’s overall growth of new supplies could spike by 18.5 percent, according to data from Radius +, the research and data analytics arm of Union Realtime, which closely tracks self-storage across the nation.

Existing facilities in the City of Brotherly Love will undoubtedly feel the impact of new facilities, which traditionally offer bargain prices in order to gain market share when they first open. The question is how much of a price ripple effect will be felt in outlying areas as a result of the new supplies.

“Some areas are going to experience some pain” says Cory Sylvester, principal at Radius +. “Rental prices will be under pressure for a few years.”

“The supply has definitely increased in south Philadelphia,” says Dan White, operations manager at Argus Properties Management, which manages nine self-storage facilities in the region, five of them within Philadelphia itself and two on the city’s outskirts.

“It’s hard to say how much more the market can take in terms of new supplies,” said White, who also serves on the board of directors of the Pennsylvania Self-Storage Association.

But White and other industry officials remain bullish in general on the Philadelphia metropolitan market, saying it’s a dynamic and densely populated area that can withstand the short-term influx of new supplies.

Indeed, the region’s overall storage penetration rate – or the number of square feet of self-storage space per capita – currently stands at 3.9, compared to the national rate of 5.8, according to Radius + data.

That relatively low figure may partly explain the interest of investors to build in the area. The region’s prices have also been attractive to developers.

In August 2019, rental prices for a 10-foot-by-10-foot climate-controlled unit hovered in the $155 range, with non-climate-control units fetching in the $130 range, according to Radius + data.

Regional prices dipped this past spring due to the coronavirus lockdowns, but prices have since nearly rebounded for climate-controlled unit to about $145 in the first half of August. Prices for non-climate-controlled units have fully rebounded to their immediate pre-virus levels.

Indeed, regional prices for both climate-controlled and non-climate-controlled units are currently hovering at their approximate August 2017 levels, an indication of how stable the overall Philadelphia-area market has been over recent years, according to Radius + data.

In all, the Philadelphia area has “strong supply-demand fundamentals” that make it an attractive market for investors, says Monty Spencer, CEO of Storage Acquisition Group in Yorktown, Virginia.

Some subsectors of the market may be seeing some overbuilding, but the market as a whole is solid, Spencer says.

There are specific pockets within the Philadelphia MSA that are considered a “high barrier” to enter, few owners are willing to sell, Spencer said.  “It’s a difficult market to acquire institutional-grade assets,” he said.

Mike Moyer, the owner of Allentown-based Budget Store & Lock Self Storage, which owns 37 facilities in the region, agrees that it’s hard to find good properties to develop or buy in the region. “It’s like finding a needle in the haystack,” he says.

Outside the city proper, the self-storage market is seeing some new-construction activity, though not nearly as much as in the city of Philadelphia itself, says Moyer, president of the Pennsylvania Self-Storage Association.

“I wouldn’t say we’re extremely overbuilt,” says Moyer of outlying towns and cities near Philadelphia. “There’s been activity, but in general I would say it’s been stable.”

Despite the uncertainty this past spring due to the coronavirus outbreak, demand for self-storage space remains strong in the region — and the interest in buying and selling also remains steady, Moyer says.

Radius’s Sylvester agrees that outlying areas have seen only “moderate growth’ in inventory in recent years. “Many areas are doing just fine,” he said, adding that the southern New Jersey region is performing particularly well.

But he said there’s no escaping the fact that 58 new facilities are in the “pipeline stage” of development, potentially adding 4.5 million square feet to the region’s current 24.3 million square feet of self-storage space. Again, most of that new supply is in the city of Philadelphia itself, but price pressures will indeed build, he said.

The same phenomenon has happened in other markets around the country: A flood of new supplies temporarily driving prices down, followed by a pullback by investors and then a slow recovery back to old price levels. If that’s indeed in store for Philadelphia, then the long-term prospects for the region remain bright.

“We’re still very optimistic about Philadelphia – and not just the immediate metro market but the entire Metropolitan Statistical Area,” says Spencer of Storage Acquisition Group, noting the Camden, New Jersey area is also a “very attractive” area for investors.

Self-storage Markets at a Glance:

Philadelphia Metropolitan Area

Square Feet of Space 24.3 Million
Number of Facilities 452
Population 6.2 Million
Penetration Rate 3.9
New Supply Increase in Pipeline 18.5%

Note: Data from Radius+


The Storage Acquisition Group logoThe 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: The Carolinas

TSAG Market Analysis: The Carolinas

By: The Storage Acquisition Group

Aerial of Downtown Charlotte, North Carolina, USA

Due to the “extremely high” influx of new self-storage supply in recent years, the North Carolina and South Carolina storage markets can expect prices to remain low into the foreseeable future until the two-state region’s supply-and-demand imbalance stabilizes, according to industry experts.

North Carolina is already starting to see prices settle down after unprecedented supply growth over the past three years, including a 17.5 percent supply surge in the Charlotte area and a whopping 25.6 percent spike in the Raleigh-Durham area. Both rates are well above the national 10.8 percent growth rate during the same time period, according to Radius+, the data analytics and research firm that closely tracks self-storage across the nation.

With North Carolina’s population continuing to increase – and with Raleigh-Durham’s “Research Triangle” acting as a major generator of economic activity – the Tar Heel state should soon reach a stabilization point in prices, which have fallen anywhere from 25 to 35 percent for 10-by-10-foot climate-controlled units since 2016, according to Radius+ data.

“The prospects for Charlotte and other markets (in North Carolina) remain very strong,” says Cory Sylvester, a principal at Radius+. “The fundamentals are still there.”

Robert Kapp, president of American Self Storage in Raleigh, agrees that the new-construction frenzy has recently eased in North Carolina and prices are starting to stabilize. Kapp’s firm owns 10 facilities in North Carolina, stretching from Raleigh-Durham to the Charlotte area.

“It was sort of like a wild, wild west gold rush,” Kapp said of the recent overbuilding in North Carolina. “Some developers got their fingers smacked a little, so the new pioneers that were coming into the market are slowing up. Things are settling down.”

But South Carolina is a different story. Its recent building boom – including a 25 percent jump in self-storage supply in the Charleston area over the past three years – came a little later than the construction craze in North Carolina, according to data.

As a result, it may take a while longer, perhaps a few years, for the absorption of new supplies and for prices to stabilize in metro-markets such as Charleston and Greenville, industry experts say.

Any stabilization would be welcome in Charleston, where prices for 10-by-10 climate-controlled units fell by 27 percent from 2016 to 2019. Prices for non-climate-controlled units fell by 38 percent during the same time period, according to Radius+ data.

The ongoing coronavirus pandemic, and the ensuing economic downturn, has only exacerbated the pricing situation in Charleston, where prices for both climate-controlled and non-climate-controlled units were down in June by about $20 compared to the same period in 2019, according to data.

Part of that pandemic-era plunge is directly attributable to real estate investment trusts (REITs) slashing their street rates in order to gain market share, a phenomenon that’s happened in other markets around the country, Sylvester says

“They’ve really gotten whacked,” Sylvester says of Charleston self-storage operators in general.

Kevin Leebrick, head of My Storage Ops, which owns five self-storage facilities and manages others across the Carolinas, says South Carolina has been “hit a little harder than North Carolina” due to the state being “awash in new supply.”

Why the surge in new supply in South Carolina? Besides the fact, the area is doing well economically (the pandemic downturn aside), South Carolina was actually underserved for years in self-storage facilities, thus attracting hungry investors determined to develop as fast as possible, says Leebrick.

“Investors have discovered South Carolina,” says Leebrick, a member of both the South Carolina and North Carolina self-storage associations.

Today, South Carolina’s major submarkets are anything but underserved.

Charlestown’s self-storage penetration rate – or the number of self-storage square feet per capita – stood at 8.1 in June, compared to the national average of 5.8 square feet per capita. Greenville’s penetration rate was 7.5 in June.

By comparison, Charlotte’s penetration rate stood at 6.6 in late June, while Raleigh’s hovered around 7.2.

“It’s going to take a while to absorb all the new supply” in South Carolina, says Leebrick.

But industry officials stress that, in the short-term, there are still attractive pockets of opportunities for investors in both states, particularly in North Carolina.

Monty Spencer, CEO of Storage Acquisition Group in Yorktown, Virginia, says the best investment opportunities always come down to the “neighborhood market,” not the broad-brush state markets.

In North Carolina, Spencer says some areas around Charlotte and Wilmington remain interesting prospects for investors, while the Raleigh-Durham area remains more tenuous.

In South Carolina, the situation is similar – some submarkets are more attractive than others. The Hilton Head and coastal areas in general remain strong markets for investors, especially if individual towns have high-barriers to entry, such as zoning restrictions.

By comparison, the Charleston and Columbia areas are not nearly as attractive due to recent overbuilding, Spencer says.

“You have to be a little more careful in those areas that have seen overbuilding,” says Spencer.

Radius+’s Sylvester says both North Carolina and South Carolina should rebound from past overbuilding, as their populations and economies grow and create move demand for self-storage.

“They’ve both seen massive increases” in supply, he said. “But ultimately their population growth over time can keep up with the supply growth. It will just take some time.”

Self-storage Markets at a Glance:

Charlotte, NC Raleigh, NC Charleston, SC
Square Feet of Space 17.3 million 9.9 million 6.4 million
Number of Facilities 401 202 134
Population             2.6 million 1.3 million 798,000
Penetration Rate 6.6 7.2 8.1
3-Year Growth Rate (Supply) 17.5% 26.5% 25%

Note: Data from Radius+


The Storage Acquisition Group logoThe 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.

Repurposing Vacant Retail: Via Conversion to Self-Storage

Repurposing Vacant Retail via Conversion to Self-Storage

By: Dan Cromwell, CCIM, Senior Advisor

U-Haul Trucks Lined in a Row

Kahului, Maui – October 2018: Our direct flight touches down at 11:30 AM HST, Kahului Airport (OGG), 5:32 hours after takeoff from Los Angeles International Airport (LAX). The start of our semiannual visit to our condo in Kaanapali is officially underway as we shift gears into muscle memory: the Mrs. picks up the rental car while I collect my golf clubs and other checked baggage. We load up the rental car and head to our first stop at Costco, where we pick up the basics for the next week. Next stop, the adjacent K-Mart for our non-bulk items – or so we thought…

Instead, we were greeted by an impressive storefront for the very first U-Haul full-service facility on the Valley Isle. Make no mistake, this is a highly visible, “First & Main” retail location that was home to a very successful K-Mart for the previous 24 years, not some converted warehouse in a nearby industrial district. U-Haul’s parent company, Amerco Real Estate Co., purchased the site for $26.8 million on Oct. 17, 2017, from 424 Dairy Road LLC, a company of Hendricks Commercial Properties of Beloit, Wis., according to county property tax and state business records. Factored against the 107,520 sq. ft. store footprint, this represents a price per sq. ft. of nearly $250/sq. ft. It is worth noting that the building sits on 7.3 acres of fee simple land that should attract interest from pad users, especially quick-serve & drive-thru dining options.

*The acquisition of the Kahului facility was driven by U-Haul Company’s Corporate Sustainability initiatives: U-Haul supports infill developments to help local communities lower their carbon footprint. Their adaptive reuse of existing buildings reduces the amount of energy and resources required for new-construction materials and helps cities reduce their unwanted inventory of unused buildings.

By repurposing the former Kmart, U-Haul prevented the use of 360 tons of metal manufacturing and transportation (the same amount of steel used to make 363 passenger cars); avoided 5,730 tons of new concrete pours (enough to create 116 miles of concrete blocks); kept 6,237 tons of construction and demolition debris out of landfills (avoiding 240 dump trucks traveling 5,038 miles in total); and stopped 3,759,443 pounds of greenhouse gas emissions from entering the atmosphere (the same carbon emissions of 288 large SUVs or pickup trucks for one year).

In addition to the remarkable benefits resulting in a reduced carbon footprint as demonstrated in the Kahului K-Mart example, I see these conversions as a viable, stand-alone business model for the following reasons:

  • Proven track record with the previous retailers within in-fill retail locations surrounded by established communities with a (presumably) built-in customer base.
  • Excellent visibility on a high-traffic retail corridor providing consistent signage reminders for potential customers along with a strong long-term branding opportunity.
  • Faster delivery than “ground-up” developments with drastically reduced pre-development costs due to the elimination of site engineering and site preparation work.
  • Reduced “cost-of-market-entry” expenses due to the existence of a building shell – note that most big box stores have the volume (ceiling height) necessary to support a mezzanine level.

Needless to say, there are also a number of challenges facing a conversion from retail to self-storage, including the following examples:

  • Current zoning does not allow for self-storage. This can often be overcome by obtaining a conditional use permit (CUP) that expands allowable uses to specifically include self-storage.
  • Government officials clinging to the hope that the vacant store can attract another retail use so the City can continue to receive sales tax, the lifeblood of many community’s source of income. This false hope often wears thin as the months pass and the negative impact of a high-profile vacant storefront outweighs the harsh reality that there just isn’t another retail user on the horizon, especially if/when the property becomes the target for graffiti taggers.
  • NIMBYs – there seems to be prevailing concerns shared by neighboring property owners that the storage facility will generate excess traffic with illegal dumping on nearby sites. These objections can be offset by the fact that the previous retail user-generated more traffic than most self-storage users would create and the on-site security could actually thwart any illegal dumping.
  • Unrealistic pricing that doesn’t support a conversion. If the seller adamantly holds out for a “retail” sale price, it won’t pencil out for conversion. Ideally, a developer will be able to purchase the shell for an amount well below the replacement cost.
  • Inadequate load capacity. A fundamental rule-of-thumb for storage facilities is a load rating of 125 lbs/sq. ft. Unless the previous retail use was a warehouse club like Costco or Sam’s Club, this could prove to be a dealbreaker if the cost of retrofitting the foundation throws the overall conversion budget out of synch. Ideally, the current owner is able to produce the engineered drawings for the facility; otherwise, an “as-built” inspection/calculation will be necessary before proceeding with an acquisition.

The identification and qualification process should adhere to the same rigorous analysis that one would employ in any site selection assignment in order to understand the underlying site characteristics.

  • What are the underlying demographics in the trade area?
  • Are these numbers static or is the trade area in a state of transition?
  • What about psychographics (tapestry segmentation) – is the make-up of the populace conducive to developing a successful self-storage facility?
  • Is the subject building an isolated vacancy or is the overall retail trade area in a state of decline?
  • What is the competition, both in terms of existing self-storage facilities and other potential uses imagined by other prospective buyers?

In closing, as the pace of store closings picks up as a result of the impact caused by COVID-19 restrictions, there should be ample opportunities to acquire well-positioned assets priced well below replacement costs. Combined with reduced interest/competition from existing retailers looking to expand, this may be an ideal time for self-storage operators to consider the upside(s) of a campaign focused on conversion from retail to self-storage.

*Taken directly from U-Haul’s corporate website.


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Dan brings decades of experience in nearly every component of the CRE to TSAG. He has expertise in economic incentive negotiations, site selection & evaluation, tax increment financing, public/private partnerships, entitlements, acquisitions, dispositions, strategic planning, development services, investment/financial analysis, centroid, and roll-out studies.

TSAG Market Analysis: Atlanta

TSAG Market Analysis: Atlanta

By: The Storage Acquisition Group

Atlanta, Georgia, USA Downtown Skyline Aerial

Atlanta’s self-storage market is expected to rebound just nicely, thank you

It may take a few more years for self-storage prices to stabilize in the Atlanta area due to recent overbuilding and rate hits caused by a mini-price war during the early stages of the coronavirus outbreak, industry officials say.

Still, industry experts remain bullish on the Atlanta market long-term, saying the region’s population and economy are expected to grow in the coming years and create yet more demand for self-storage facilities.

It’s a very solid market long-term,” says Cory Sylvester, a principal at Radius+ the data analytics and research firm that closely tracks self-storage across the nation. “Atlanta will rebound.”

Industry officials are optimistic about Atlanta’s future for the very same reasons that caused its current problems in the first place: It’s a hot metropolitan area that self-storage operators and developers want to mine to its fullest.

And mine it, they have, in recent years to the tune of a 14 percent increase in the region’s supply of self-storage space over the past three years, bringing the Atlanta market’s total self-storage supply to about 41 million square feet, according to Radius+ data.

Not surprisingly, the supply spike has led to price pressures, causing rates for 10-foot-by-10-foot climate-controlled units to fall from the $130 range in the winter of 2019 to the $110 to $115 range this past winter, before the COVID-19 crisis hit across the country, according to Radius + data. The coronavirus outbreak – and subsequent economic downturn – knocked another $5 to $10 off of individual unit rentals in the Atlanta market, data suggests.

It was a double whammy,” Calvin Byrd, CFO of Byrd’s Mini Storage in Dawsonville, Georgia, about an hour north of Atlanta, said of both supply and pandemic price pressures. “Some areas of the region have been harder hit than others.”

Byrd, who is president of the Georgia Self-Storage Association and whose company owns 12 facilities in Georgia, stressed that the oversupply problem is limited to certain areas of the Atlanta region, not all areas.

For instance, a handful of new self-storage facilities have popped up near one of his firm’s centers, causing prices to fall in recent years, Byrd said.

And the new rivals were not national real estate investment trusts (REITs), but rather local competitors trying to take advantage of the investment popularity of self-storage facilities in recent years, Byrd said.

Most of them are first-time builders,” Byrd said. “They’re attracted to the (industry’s) positive vibes and low-interest rates.”

Raj Sheth, CEO of Boardwalk Storage, owner of eight facilities in Georgia, agrees that oversupply problems and subsequent price pressures all depend on where you are in the Atlanta area.

In and around the city of Cumming, just north of Atlanta, five new self-storage facilities have opened over the past four years alone, driving down monthly prices from as high as $160 to as low as $70, Sheth said.

And that’s just one example,” Sheth said. “It’s all tied to overbuilding. It’s a pattern you see in other cities. In some ways, it’s a bit like the oil industry, where the prices get to a certain high point, then the frackers come out. The same thing happens in self-storage.”

But the surprising thing about Atlanta is that it’s penetration rate – or the number of self-storage square feet per capita – is not completely out of whack with the rest of the nation.

According to market data, Atlanta’s penetration rate is just over 8 square feet per capita, compared to the national average of about 7 square feet per capita.

Meanwhile, Atlanta’s 7.5 percent projected growth in supplies – counting both under-construction and planned facilities — is in approximate line with national supply-growth rates, Radius+ data shows.

The problem is that Atlanta’s recent new supply came rushing in all at the same time, forcing year-over-year price cuts of 8 percent for non-climate-controlled units and 12 percent for climate-controlled units in May, according to Radius+ data.

Cory Sylvester, with Radius+ said “Atlanta may seem to be struggling, but it’s fairing well compared to other hot major markets, such as Las Vegas and Orlando.”

And with Atlanta’s expected continued growth in population and jobs, the prospects still look bright for self-storage in the region, Sylvester said.

I remain long-term bullish on Atlanta,” he said.

Brooks Lumpkin, the owner of Southeast Storage in Atlanta, said self-storage developers and owners in the region just have to accept there’s a cycle to the market: As Atlanta’s population and self-storage demand rise, developers start building until prices start to deflate, then they retreat until prices stabilize, only to start building again.

You have to assume that more supply will be coming at some point,” said Lumpkin, whose company owns two facilities in the Atlanta area. “You have to be strategic when (you build or buy facilities) and just be prepared for new competition.”

As of now, the Atlanta metropolitan area is expected to grow at an annual 2 percent to 3 percent rate, with each percentage point equaling about 70,000 people – and that means a lot more demand is on the way, assuming population and economic trends continue, said Lumpkin, a member of the Georgia Self-Storage Association’s board of directors.

It will take a few more years to fill up the new supply of self-storage space that’s come online in recent years in Atlanta, said Lumpkin. But the population and demand will also continue to grow – and once again create a need for more space in Atlanta, he stressed.

I expect long-term positive growth,” Lumpkin said. “It’s an attractive industry in an attractive market.

Interested in receiving more Market Analysis Reports from TSAG?  Call our office and be connected with one of our advisors or click here to sign up.


The Storage Acquisition Group logoThe 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 Property Taxes in Self Storage

Understanding Property Taxes in Self Storage

By: Bill Sitar, Jr. Esq., Vice President & Senior Advisor

Property tax and tax return word on folders stack with label black binder on paperwork documents summary report in busy offices. HR-human resources business bookkeeping accountancy Document Concept

Property taxes are a critical component to understanding the value of any real estate asset class, including self-storage.

Real property taxes are typically among the largest line item of expenses in a profit and loss statement. Managing your property taxes effectively is extremely important in a successful self-storage operation.

Being cognizant of the local tax appeal process is incumbent upon self-storage owners that desire effective management solutions for their properties. The most important aspect of the appeal process is initially understanding the critical dates in the process, such as filing deadlines, valuation dates, and appeal periods. Each jurisdiction has different deadlines. Typically, the burden of proof is on the taxpayer challenging the assessment of the property. This means that the taxpayer when challenging his or her property assessment before a local board or court must provide proof that the assessment is incorrect. That proof could come in many different forms including, but not limited to, comparable sales, an appraisal report, a property inspection report, an environmental report, and the like. In some jurisdictions, assessments change every single year. In some jurisdictions, the underlying ratios change every single year. In all instances, these assessments should be reviewed every single year for effective property management of your storage facility.

In most jurisdictions, when an appeal is filed the relief sought is only for the prospective year ahead and not for past years. In some jurisdictions, different boards hear different levels of cases and the taxpayer must be sure it is before the correct board. For example, in New Jersey, a property with an assessment below $1 million can be filed to the county tax board, in which the property is located. However, if the assessment is above $1 million, it may be filed directly to the Tax Court of New Jersey. Typically, a case filed before a county board will be heard faster with limited discovery and less sophistication. The higher courts are more sophisticated but do typically take a longer time, for case disposition.

Other concerns that taxpayers must recognize are that when appealing one’s tax assessment, often times the courts require that the taxes must be paid in full prior to the hearing being allowed to move forward. Additionally, some jurisdictions require annual income statements to be filed with the local municipality, regarding a property’s economic performance, in order for the appeal to proceed.

When looking at valuation, most self-storage facilities will be valued by either the income approach or the sales comparison approach. The income approach utilizes a property’s income less operating expenses and a vacancy rate to derive a net operating income. Thereafter, a capitalization rate is applied to the net operating income to determine the property’s overall value. Under the sales comparison approach, closed transactions of similar properties are analyzed and adjusted for various factors, such as location, size, and timing. Thereafter, the adjusted sales prices are analyzed to determine the overall value.

The biggest takeaway regarding property tax management is that every single year prior to the filing deadline, a property tax review should be made. Necessary to this process, the owner should review the most recent tax bill, the current rent roll, and income and expense statements of the last 3 years. If an appeal is warranted, make sure it is filed before the annual deadline in your jurisdiction!

If you have completed the research in your market and are now in need of reporting information to appeal your taxes, you can reach out to a self-storage specialist to run the necessary reports.   Our company works with self-storage owners and provides complimentary reporting on sales comps, rent comps, etc. and is able to help calculate your cap rate.


Bill Sitar

Bill joined The Storage Acquisition Group in 2016. As the Vice President of Sitar Realty Company & TSAG, he brings a wealth of knowledge to the group. Bill’s diverse background in real estate brokerage, legal services, development, and the financial sector enables him to provide comprehensive solutions during the acquisition process. In addition to being a licensed New Jersey real estate salesperson, Bill has a law license in both New Jersey and Pennsylvania.

Add Value to your Self Storage Asset: Strategic Planning

Add Value to Your Self-Storage:  Strategic Planning

By: Scott Eckert, Advisor

Self storage unit full of cardboard boxes. 3d rendering

Implement a Strategic Plan

Self-storage is a unique asset class with its own set of challenges. As with any investment, it is critical for operators to develop a strategic plan that identifies those critical challenges and builds an approach to dealing with them effectively. Most operators know that developing a strategy is important, but almost all find it daunting to implement or difficult to communicate. Savvy operators have learned to navigate through unpredictable markets and prosper by developing, implementing, and committing to a strategic plan. In certain instances, the potential to create or add value is significant when a strong strategic plan is put in motion.

A strategic plan is a roadmap to grow your business. Goals must be specific and realistic. A well-crafted plan clearly defines the goals or desired outcome and includes a subset of major steps or actions needed to reach it. However, constructing a plan is only one part of the process. Once designed, a strategic plan should be used as a communication tool that coalesces all the stakeholders around a shared vision. Without implementation or failing to communicate your strategies, a strategic plan is worth no more than the paper it’s printed on.

Operators often have a plan and know what changes they should implement to increase revenue or gain efficiencies but fall short in taking the appropriate steps in achieving their desired outcome. This may require rental rate analysis, a change in procedures, or new approaches to marketing.

Markets are unpredictable, volatile, and susceptible to threats. The fear of the unknown is what scares so many operators. Whether it is the fear of losing customers or relinquishing control to management, the owner must overcome their fears and face their challenges head-on to generate new results. Making good decisions can lead to profits, but mistakes are costly. Leap out of your comfort zone and take decisive action, even in the face of uncertainty.

The following information provides tips and considerations for owners and managers to explore throughout the strategic planning process:

Raise Rents and Keep Customers Happy

Owners suffer through paying bills for a less than full facility and leave money on the table when they fail to increase rents on a scheduled basis. Prudent operators, however, will enhance revenue by raising rents on existing tenants. From my experience talking with owners, many continue to keep long term customers at the same rent that they’ve paid since the beginning of their lease, even if the rent is well below market levels. Most of the time it’s because they fear the customer will leave and they’ll be stuck with a vacant unit.

Rental rates vary across markets. Before you raise the rent on a tenant, you will want to do some market research. Speak with other owners and managers to see where your rents stack up. A weekly market survey of competitive properties located within your 3 to 5-mile trade area is the best way to estimate the achievable market rents for your facility.

Be realistic in your assumptions and commit to a plan. Planning, cost management, and revenue forecasting are essential to any business and must be done. However, these activities can be dangerous traps for a strategic operator if their plans are reliant on poor assumptions.  Make sure your unit mix is optimized and determine what unit types are in the greatest demand.

Many owners fall into the trap of applying an across-the-board rent increase to all tenants instead of assigning value to each particular space. A blanket increase essentially weakens the operator’s position by falsely assuming all units can absorb an increase. Conversely, a savvy operator will analyze the market rents for each type of unit and base their estimates on specific unit types all while measuring the tenants’ capacity to pay. Paying attention to tenancy, length of stay, and in-place rents are highly important.

When notifying your tenants of a rent raise, provide a list of any recent upgrades and encourage them to check nearby pricing. If priced appropriately, you should experience less turnover and keep more happy customers. Many customers will accept the rental increase as reasonable if they know what value they’re getting in return.

Increase Economic Occupancies

Occupancy is typically split up into two categories: physical and economic. Both numbers are important measurements when evaluating a property’s performance and are used in the valuation of a property.

Physical occupancy measures the percent of net rentable square footage that is occupied.

Economic occupancy measures the actual gross income as a percent of the potential gross income.

When evaluating vacancies, it is important to compare the actual rent received to the potential rent, and not just focus on the physical occupancy. Oftentimes, the asking or offering rents at self-storage facilities are higher than the actual collected rent or contract rent. This is a consequence of discounts or concessions that are offered to customers initially to get their business. Increasing the contract rent levels at a facility is a must for all storage owners. Limit or eliminate concessions on unit sizes with high turnover rates. An increase in contract rent levels will maximize economic occupancy.

Monitor Operating Expenses

Typically, the operating expenses should approximate between 30 percent and 40 percent of gross income. Many of these expenses are fixed and others are variable. Managing the variable expenses, or the ones you can control is essential to monitoring your operating expenses.

  • Administrative Costs – When is the last time you price shopped for all your administrative needs? Whether it’s for your internet and phone bill or office supplies, taking the time to call a few competitors can translate into significant savings each year.
  • Utilities – Many self-storage facilities offer climate-controlled units. These are indoor air-conditioned or heated units. Try to maintain the temperature at 60-80 degrees, or whatever range you think you can truly maintain and ensure tenant satisfaction. Installing motion detector and LED lighting is another way to reduce your electricity costs.
  • Advertising – For some existing facilities, especially those located along roadways with excellent visibility and signage, an extensive advertising campaign may not be necessary. However, as nearby competition increases, owners are recognizing the importance of proactively marketing the store. Analyze your marketing and advertising costs and reevaluate where you are spending your marketing dollars. As trends evolve, so do marketing tools. Make sure you market the facility across online and social media platforms.
  • Repairs and maintenance – Repairs and maintenance expenses typically include all third-party maintenance service contracts and the cost of maintenance and repairs supplies. Proper maintenance includes trash removal, landscaping, pest control, security gate maintenance, and other maintenance items. Repairs and maintenance expenses are very property specific. Much of the preventative maintenance can be done by a handy owner or manager. Otherwise, get a few quotes from local contractors to make sure you get the best price and the work is done right.

Maximize Other Income

Other income is typically associated with items such as forfeited deposits, late charges, locks, insurance, and other miscellaneous charges. It also includes sales and commission income such as truck rentals, box and packing supplies, towing accessories, etc., and the income derived from these sources is a net figure. The additional services and products offered at your facility should provide convenience for your customers, and as a result, you can expect a boost in additional revenue.

Stay Customer Focused

Managers are viewed by your community as the face of the company. As a self-storage manager, it’s your duty to provide excellent customer service. Honesty, flexibility, and dependability go a long way in the eyes of the customer. Master these skills, and you will already be ahead of the pack.

Focus your energy on the important choices that influence customers to spend money at a storage facility. Get feedback from tenants on a routine basis. The customer will always decide to spend their money at the location that provides a superior value proposition.

Navigating the self-storage industry can be an ongoing process that is best achieved by utilizing the help of industry professionals.  This is why our company offers a variety of industry-specific reports and facility valuations to storage owners at no cost.  Before you consider investing in your facility, reach out to one of our advisors to see how your market is performing and the best use of your time and money.


modern business center

Scott joined The Storage Acquisition Group in 2017 to source acquisition opportunities throughout the Mid-Atlantic region. Scott’s background is in real estate appraisal and valuation assignments of multifamily property throughout Virginia.

Building Relationships: How they Enhance your Self-Storage Investment

Building Relationships:  How they Enhance your Self-Storage Investment

By: Fred Paris, Vice President & Senior Advisor

They're stronger when they're together

People like to do business with people they like, and people like others who appreciate them.  Someone may forget what you said or what you did, but they will never forget how you made them feel.

The most powerful tool in developing relationships is to appreciate other people, and the two most powerful words in building a relationship are ‘Thank You’.  The concept seems simple enough, but all to often people forget to invest in building the relationship and rush to discuss “the deal”.

There are small steps you can take when initiating the building of a relationship which pays off tremendously in the long run.  From when I began my career in planning and economic development, and throughout my 18 years in commercial real estate I have relied on some key attributes of building successful business relationships:

  • Authenticity – Be who you are and accept others as they are. It is incredibly transparent when you are working with someone and they are not being authentic.  By definition being authentic comes from within.  It is when our actions and words correspond with our beliefs and values. It is being ourselves, not an imitation of what we think we should be or have been told we should be, and when you choose to add this to your business relationships it builds respect and trust.
  • Mutual Respect – Be patient, attentive, truly engaged, and interested in the other person’s point of view. One of the best and easiest ways to show respect to the people you are working with is to get to know them on a deeper level. Take the time to listen and get to know their motivations and goals.  At a professional or personal level, their goals will allow you to work more meaningfully as a team.  You will also learn what the best way to communicate with them is and they will get to know you better as well.
  • Be Personal – Show interest in the other person’s beliefs, family, leisure activities, etc. This can be achieved by focusing on two qualities: listening and sharing.  If you truly listen to someone speaking, they know it. They feel it. Are you responding as they speak to show them you hear what they are saying?  Especially when conducting business over the phone, it is necessary to respond appropriately to show you heard what was said.  It’s also important to start sharing. A trusting relationship can grow because both sides are opening up. By sharing the relationship has the best opportunity for growth and future success.  If you do not feel comfortable sharing personal information, that is fine, you can share your business knowledge and allow a connection to be developed, but sharing personal aspects of your life demonstrates the personal connection that is so important to fruitful relationships.
  • Goals & Values – What are the other person’s business/personal goals and what values do they live by. We touched on this with mutual respect, but understanding someone’s values as they relate to their goals provides you with a better understanding of them and the decisions they make.  A person’s values are what they find important in life and understanding if it is their family or their bank account makes a difference in how you build the relationship.
  • Referrals – Be ready to offer contacts and referrals that fit the situation and don’t compromise your relationship with these people. Referrals are a reflection of you.  When you refer someone, it helps to build trust but can also have the reverse effect.  This is why it is essential to have a good network of business partners that you trust.  You would never want a referral to hinder a relationship you are trying to build.
  • Loyalty – This may be one of the most important traits a person can have for a long-term personal relationship. This trait seems to be less prevalent in today’s world, but may well be the most important one for securing a long-term relationship.  Knowing that someone truly has your back often leads to the deepest and most trusting personal and business relationship.  It is important not to confuse loyalty with longevity.  It has nothing to do with the length of employment and everything to do with actions. Loyalty can be seen by people who work hard, are committed to success, and respect relationships that have been built with the right motives in mind.

When I entered the storage industry in 2014, I began to build my network of relationships.  Over the past 6 years, I have maintained relationships with several self-storage owners that were among some of the first I contacted.  They may not have had an interest in selling then, but I continued to build the relationship.  Many have come back to me or became open to working with our company on acquiring their facilities.  This is due to always being authentic, demonstrating mutual respect, showing interest in their personal values, and staying loyal to them over the years.  I firmly believe that building personal relationships is the best investment you can make to enhance your opportunity for success in the self-storage industry.


Fred Paris

Fred joined The Storage Acquisition Group in 2014 and specializes in finding facilities for acquisition in the Mid Atlantic and South.  Fred currently serves as the company’s Vice President and a Senior Advisor.