TSAG Market Analysis: Calgary

By: The Storage Acquisition Group

Calgary is a seemingly boom-or-bust town in more ways than one.

Canada’s third-largest city and fourth-largest metropolitan center, Calgary is well known for its vibrant, though volatile, oil-and-gas industry that has economically dominated large portions of Alberta Province for decades now.  This has spurred fast growth when times are good for the oil and gas markets and slow growth when times are not so good.

In a way, Calgary’s self-storage market reflects that boom-or-bust trend.  Some areas of metropolitan Calgary are experiencing an oversaturation of self-storage facilities while other areas have little or no facilities. Other areas have seen construction of new self-storage facilities, while many areas still rely on old (and full) drive-up facilities.

“It doesn’t make sense sometimes,” says Louis Libin of Calgary-based Trilogy Self Storage, referring to the juxtaposition of old and new storage facilities spread inconsistently around the Calgary region. “Calgary is an anomaly. You’ll have an old and unheated drive-up facility doing well and nearby a new facility that’s struggling.”

To be clear, Libin and other self-storage players are big fans of the Calgary market, noting that the metropolitan area continues to grow in population, though in fits and starts, and that the economy has been diversifying in recent years. The Calgary region’s population now stands at about 1.4 million people.

As for the region’s self-storage market, Radius Plus currently tracks 64 storage facilities, or 3.17 million square feet of space, in the Calgary metropolitan area.

As is the case in other Canadian cities, Calgary has fewer square feet of storage space per capita compared to metro areas in the U.S. The self-storage penetration rate for metropolitan Calgary is about 2.25, roughly equal to other major Canadian cities but only about one-third the rate as seen in U.S. cities.

The reason cited for the relatively low storage supply in Calgary and other Canadian cities: higher taxes and construction prices and tougher zoning and building codes.

Industry experts also note that self-storage is still a relatively new concept for many Canadians, though its popularity and the demand for space are steadily rising.

The result of the limited supply and slowly growing demand: solid rental prices in Calgary.

Prices for 10-foot-by-10-foot storage units can range anywhere from $180 to $200 and up (Canadian dollars) per month, or $145 to $161 in U.S. dollars, according to Radius Plus data. Those are strong numbers, no matter what the international currency.

The favorable rental numbers and other positive factors are attracting more self-storage investment players to Calgary, says Matt Verity, vice president of storage operations and marketing at StoreWest, which owns two self-storage facilities in Calgary, one in Montreal and two in Nova Scotia.

“It’s getting more competitive,” says Verity. “More companies are looking at Calgary.” They include both Canadian and U.S. self-storage players, he notes.  New construction is occurring in some parts of the city – while existing facilities are being snapped up. “Consolidation is occurring,” says Verity.

It helps that the oil-and-gas industry has been on the upswing of late, as commodity prices soar amid supply-chain problems across the world, caused mostly by pandemic-related disruptions at international ports. Calgary is benefiting from that recent surge in oil and gas prices.

“It’s getting more robust,” Verity says. “We’re feeling more bullish these days.”

The city needed the economic shot in the arm, considering the global oil-and-gas industry had been struggling until recently and harming Calgary’s economy in the process. Indeed, the office vacancy rate in downtown Calgary remains high and the region’s unemployment rate hovers at about 9 percent, according to data.

The economic ups and downs have made Calgary a tricky place for self-storage, Calgary is a good market, but it’s volatile.  The pluses are definitely there, noting the region’s growing population and strong housing market. Calgary’s median household income is also strong at $107,479 (Canadian), higher than other major Canadian cities, such as Montreal, where the median household income is about $85,000 (Canadian), according to Radius Plus data.

In addition, Calgary may be known as an oil-and-gas town, but it’s located in a scenically beautiful area of Alberta, at the foothills of Canada’s Rocky Mountains, and its tourism and recreational sectors are considered strong — and getting stronger by the year.  That has led to a boost in storage of boats, RVs, and other recreational-related items.

“I’m very, very bullish on Calgary,” says Lloyd McDonald, director of acquisitions in Canada for The Storage Acquisition Group. “It’s a very beautiful and livable area. There’s more to Calgary than oil and gas.”

McDonald notes that storage occupancy levels in Calgary have remained strong over the years despite economic ups and downs. Indeed, some of the best-performing facilities are non-climate-control, drive-up storage structures built in the 1970s and 1980s.

Meanwhile, new facilities are mostly going up in the outer northern, western, and southern areas of metro Calgary. McDonald said there are “great opportunities” for development in underserved areas of Calgary.

Libin of Trilogy Self Storage said his firm is eyeing possible new self-storage developments “within a five- to ten-year window,” possibly marrying them up with car-wash services at sites. “I’m not too worried about raising capital (for new projects),” says Libin.  Still, zoning restrictions are among the biggest challenges facing any new developments, Libin says.

Verity at StoreWest said it’s critical to carefully research an area before embarking on new storage projects in the Calgary area. After securing a site, developers then need to closely work with community groups and boards to make sure their concerns are addressed.

Among the things communities want are well-landscaped sites and ground-floor amenities of some sort, such as retail or some other non-storage services, Verity says.

Greater Calgary at a Glance

Population	1.4M
Penetration Rate	2.25
Development Pipeline	2.25%
Median Household Income	$107,479 (Canadian)
Tracked SF of Storage	3.17M

  Note: Data from Radius+, industry officials

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: Montreal

By: The Storage Acquisition Group

First off, it’s “entreposage,” not “storage.”

That’s one of many things U.S. investors and others need to learn when trying to crack into the highly desirable but high-barrier self-storage market in Montreal, the second largest city in Canada.

Much has been made of the subtle differences between the Canadian and American self-storage markets, such as Canada’s higher construction costs and capital gains taxes and its lower number of storage units per capita compared to the U.S.

But those differences are only magnified in Montreal, the cultural and economic center of the French-speaking Quebec province that thinks of itself as almost a separate nation within a nation, with its own unique laws and regulations, including mandatory use of French when conducting (most) business in Quebec.

“French-Canadians are very proud of their language and heritage,” says Alain Gingras, senior director at StorageMart, which owns eight self-storage facilities in Quebec, five of them in the immediate Montreal area. “Anyone who doesn’t understand that (pride) is going to be in for a surprise.”

To be clear: Montreal, like other large Canadian cities, is an attractive self-storage market for long-time owners and new investors alike.

With more than 4 million people living in the metropolitan Montreal area, demand for self-storage is growing, albeit at a slower pace than in the U.S., and rent prices are strong, running around $200 (Canadian) a month, or about $156 in U.S. dollars, for a 10-by-10-foot storage unit.

But demand alone doesn’t account for the solid pricing. The Montreal area has a relatively small supply of storage properties, about 136 facilities, which amounts to about 1.39 square feet of storage space per capita, a low level compared to the penetration rate in other major Canadian cities, according to data from Radius Plus.

There are a number of reasons for the low supply, including the fact that Montreal proper is an island city at the confluence of the St. Lawrence and Ottawa rivers and doesn’t have much available space on which to build.

“The cost of land is very restrictive,” says Lloyd McDonald, director of Canadian acquisitions for The Storage Acquisition Group. “It’s not easy to find affordable space to build. Montreal is an older city, so old buildings often have to be converted if you want more storage.”

But like in other parts of Canada, as well as in parts of the U.S., zoning and permitting are tough in Montreal, increasing the time and cost of conversions or new construction, assuming investors can find properties to develop or redevelop. Further, construction costs are high in Montreal, as they are throughout most of Canada, even compared to the increasing rates in the U.S.

The city’s lack of available land and zoning restrictions has tended to push new self-storage construction into Montreal’s suburbs, though even there the pace of development is slower than in other areas of Canada, industry officials agree.

Another reason for the tight storage supply in the Montreal area: modern self-storage consisting of multi-story facilities and sophisticated climate-controlled systems – is relatively new to Canada, not just Montreal.  This is in comparison to the U.S. where these features consistently exist in major MSA’s.

“People here are just discovering self-storage,” says Simon Berman, co-founder of Montreal Mini-Storage, operator of 14 facilities in Quebec, with an additional two facilities on the way as a result of conversion projects. “There’s a relatively low awareness of self-storage, but it’s gaining acceptance. People realize they need space.”

And, last but not least, there are indeed cultural barriers that can make it challenging for some non-French speakers to do business in Montreal, such as requirements that marketing has to be conducted in both French and English.

“It’s different doing business in Quebec in general,” says David Allan, vice president of Apple Self Storage and a well-known writer and speaker about the Canadian self-storage industry. “Montreal is such a wonderful city. They’re very proud of their heritage, so they have specific laws to protect it. It’s little things that can be a challenge, such as digital marketing in both languages.”

In addition, French-Canadians tend to like doing business with local or regional companies, if possible, so larger national (or continental) self-storage operators may be at a disadvantage when it comes to some local customers, industry officials agree.

Such customer sentiments and other high-barrier factors partly explain why there are relatively few large self-storage players in the Montreal market compared to the rest of Canada.  About 50 percent of self-storage facilities in Toronto are owned by national companies, but in Montreal, the figure is only about 15 percent. Partly due to hesitancy on the part of developers and investors to enter the market.

The overall attractions of Montreal – including its size, growing storage demand, and solid pricing — ultimately outweigh any challenges.

“Montreal is such a unique city,” agrees McDonald of The Storage Acquisition Group. “It’s a good storage market with a lot of potential to grow.”

And remember: it’s “entreposage,” not “storage,” or “entreposage libre service,“ if you really want to impress the locals.

 

Greater Montreal at a Glance

Population	4.2M
Square Feet of Storage Space	5.5M
Number of Storage Facilities	136
Penetration Rate	1.39
Percentage of renter-occupied dwellings	42%

  Note: Data from Radius+, industry officials

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: Vancouver

By: The Storage Acquisition Group

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 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: Las Vegas

By: The Storage Acquisition Group

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 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.