TSAG Market Analysis: Portland, Oregon

By: The Storage Acquisition Group

Reports of past overbuilding of storage facilities in Portland appear to have been greatly exaggerated.

In the years leading up to the start of the coronavirus pandemic in 2020, Portland, Oregon was generally thought to be one of the most oversaturated storage markets in the U.S., after years of new developments by real estate investment trusts (REITs) and other large industry players.

Indeed, occupancy rates and rental prices took a hit in Portland late last decade amid the flood of new supply in the region, according to industry experts.

Then the pandemic hit, the economy tumbled and demand for storage space, as is usual during recessions, spiked across the country, leading to the sudden filling up of Portland’s new storage facilities that many thought would remain vacant for years to come.

“I was one of those who felt like we were overbuilt, but I was proven wrong,” says Edwin Kawasaki, a principal at Additional Self Storage LLC and former CFO of Northwest Self Storage in Portland. “The market absorbed all the extra supply. All the new units are now full.”

Granted, the economy could still dramatically recover, reducing demand for storage space and exposing the true non-pandemic state of the Portland storage market. But most industry officials seem to agree that the region’s population has continued to steadily increase in recent years – and thus demand should remain high enough to keep Portland’s occupancy rate in the 90-plus percentage range.

To be clear: The Portland region, with a population of 2.4 million, has seen negative effects from last decade’s building boom, with the rate of rental price increases among the lowest in the nation, due to the hefty amount of supply in the area, according Yardi Matrix data.

Yet prices are hovering in the respectable $145 range and up for a 10-by-10 non-climate-controlled unit in the Portland area – and most anticipate rental prices to continue to increase in coming years.

Overall, the amount of square feet of storage space per capita in the tri-county Portland area is about 7.3, not that much higher than the national penetration rate of 7, says Paul Fiorilla, director of research at Yardi Matrix.

The metro Portland market will be tested again in the coming year or two, with more than 800,000 square feet of new storage space currently under construction set to be delivered in 2022, Fiorilla said. An additional 1 million square feet of new space is in the planning stages.

But Fiorilla says he is cautiously optimistic the region can absorb the extra supply precisely because the Portland area’s population continues to grow, as it has in the past. From 2000 to 2020, the region’s population soared by 500,000, according to U.S. Census data.

Melissa Shandor, Chief Strategy Officer at The Storage Acquisition Group, feels the region can absorb some new supply. The reason: with hundreds of new housing starts planned for the Portland area new residents are moving in.

“As they say, where housing goes, storage will follow,” she says. “The housing starts indicate continued population growth that’s going to help fill up the square footage in the supply pipeline.”

But Shandor warns that there’s actually two sub-markets within the Portland area – the core downtown market and the outer ring market.

The core market has more storage space per capita than outlying areas.  “For those who plan to develop storage, consideration of the outer ring would be wise,” says Shandor.

“There’s more potential and opportunities in the outer ring,” says Shandor. “It’s an attractive place for development and it appears the city agrees based on the projected housing starts”

John Bull, owner of John Bull Builders LLC in Portland, said he’s definitely seen a slowdown in storage construction in the city of Portland. “There was a huge push there two years ago, but you don’t see as much building activity today,” he says. “Some projects are going up, but not as many as before.”

Besides last decade’s overbuilding in the city proper, Bull said the high cost of construction — including the cost of materials, labor and land – is discouraging many would-be developers from starting new storage projects in Portland.

Kevin Howard, a long-time veteran of the storage industry and one of the founders of National Storage Affiliates, said the Portland-area market has a history of running hot and cold.

A storage construction boom during the early 2000s came to an abrupt halt in 2008, when the subprime mortgage crisis hit and brought the nation’s financial system to its knees. It took until about 2014 for the storage industry to recover in Portland, with demand finally catching up to supply and prompting new construction again, Howard said.

Now, roughly the same pattern is repeating itself in Portland: overbuilding led to a softening of occupancy and rental rates. But this time around, the industry didn’t have to wait as long to recover, Howard said.

“The COVID crisis has actually helped the industry,” Howard, the former head of Northwest Self Storage, said of increased demand for storage during the recent economic downturn.

Despite the historic “ups and downs” of the Portland market, Howard said he remains bullish on Portland, primarily due to its continued economic and population growth.

“It’s a very strong market,” he said. “People want to be here.”

The Storage Acquisition Group’s Shandor agrees. “Portland is one of the fastest growing self-storage markets in the country,” she said. “I’m very optimistic about Portland.”

Greater Portland at a Glance

Population	2.4M
Number of storage facilities	275
Square footage	18.1M
Under construction	800,000 SF
Planning stages	1M SF

  Note: Data from Yardi Matrix

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: Salt Lake City

By: The Storage Acquisition Group

Salt Lake City hits a self-storage sweet spot.

If there’s such a thing as a self-storage sweet spot for investors, it may well be Salt Lake City.

The Salt Lake City region may not have the most impressive industry statistics when it comes to self-storage rental prices, occupancy rates and other measurements of how hot (or not hot) a market may be compared to other areas of the country.

But Salt Lake City and its surrounding suburbs still score high in just about every category of importance to self-storage players, such as in population growth, new housing construction and economic expansion, in addition to strong rental prices and occupancy rates.

As a result, the Salt Lake City area of Utah has become one of the most desirable self-storage markets to be in for owners and investors alike, industry officials agree.

“It’s a very strong market,” says Michael Wolfe, owner of Downtown Storage and an investor in other self-storage enterprises in the Salt Lake City area. “All of our facilities are doing well.”

“The Salt Lake City area has all the right check marks in its favor,” says Cory Sylvester, a partner at Radius +, the industry research and analytics arm of Union Realtime. “Where’s there’s growth in population and new jobs, self-storage will follow. And Salt Lake City has both.”

In recent decades, the Salt Lake City area has most definitely grown, from 792,000 people in 1990 to about 1.18 million people today, according to U.S. Census data. Over the years, people have flocked to the region for a number of reasons, including its natural beauty, its growing tech industry and its status as the state capital and home to the Church of Jesus Christ of Latter-day Saints (LDS Church).

Recently, the region and other parts of Utah have also seen an influx of new residents arriving from high-cost states such as California, industry officials say.

No matter what the reasons, Salt Lake City’s recent growth in population is driving a regional housing-construction boom and increasing demand for storage, says Dan Nixon, owner of Paragon Group Inc., a property management and development company that owns and operates a number of self-storage facilities in Utah. Its brands include Lock it Up Self Storage and Cubes Self Storage.

“The area’s economy and housing market are among the strongest in the nation,” Nixon says. “In-migration has been huge.”

Yet as storage demand has increased, the region has only seen relatively modest increases in new construction, data indicates.

With about 194 storage facilities, the region has 9.8 million square feet of storage space, or about 8.3 square feet per capita, which is higher than the national penetration rate of about 6, according to Radius + data.

But the region’s penetration rate is far below those seen in other red-hot storage markets, indicating Salt Lake City is far from being oversaturated with new facilities. Indeed, only nine new facilities are currently in the planning pipeline, according to Radius +.

The general lack of overbuilding is one of the reasons why rental prices have remained relatively stable, excluding recent price spikes associated with the COVID-19 pandemic and economic downturn. In December, rents for 10-by-10-foot, climate-controlled units in the area were going for about $150, according to data.

Occupancy rates, meanwhile, have remained steady, in the 93 percent range, at facilities tracked by Radius +.

Jordan Cherrington, a manager at Draper Self-Storage and a member of the board of directors at the Utah Self Storage Association, says many developers are balking at new projects due to the high cost of construction.

Rent prices may have risen 10 percent to 20 percent due to the pandemic-era increase in demand for storage, he noted. But construction costs for some items have increased by 100 percent or more, he says.

“Construction prices are through the roof,” Cherrington notes. “A lot of builders are very hesitant to proceed with projects.”

Nixon adds that the cost of land has also skyrocketed in recent years, further discouraging new developments. “I’m not buying any new land for self-storage (development) because none of the numbers pencil out,” he says.

Jonathan Cutler, chief operating officer at The Storage Acquisition Group, says there’s another reason why there isn’t much construction going on in the Salt Lake City area: zoning and permitting restrictions. “A lot of municipalities are stopping self-storage from coming in,” says Cutler.

The combination of scarce land and government building restrictions has contributed to the Salt Lake City region becoming a “high barrier area” for those trying to expand or crack into the market, says Cutler.

But that’s good news for existing facility owners, who benefit from limited supply amid increasing demand for storage.

Cherrington notes that many large investors, attracted to the Salt Lake City market, have recently been offering huge sums to buy properties, driving down cap rates from about 6.5 two years ago to below 4 today.

“It’s a great time if you’re an owner,” he says.

The Storage Acquisition Group’s Cutler said he’s not surprised that so many industry players want a piece of the Salt Lake City action. He rattled off all the pluses of the area – its growing tech industry (with some calling the region a “mini-Silicon Valley”), skilled work force and strong tourism sector, among other strengths.

“Salt Lake City is a great opportunity for anyone looking to do business in a high-growth area,” Cutler says. “We’re very high on Salt Lake City.”

Salt Lake City at a Glance

Metro Area Population	1.8M
Penetration Rate	8.3
Total Storage Space	9.86M SF
Occupancy Rate	93%
Median Household Income	$75,878

  Note: Data from Radius+, U.S. Census

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: Seattle and Tacoma

By: The Storage Acquisition Group

The Seattle-Tacoma self-storage market: Steady as she goes

Looking for a self-storage market that’s traditionally been strong, stable and steady over the years? Those interested in self-storage need look no further than the Seattle metropolitan area.

The Seattle-Tacoma self-storage market definitely has had its share of challenges and opportunities in recent years, from high land prices and tough zoning laws to a growing population and vibrant tech-driven economy.

Through it all, the Seattle-Tacoma area has managed to achieve a sort of Goldilocks balance – not too hot, not too cold – that’s led to a combination of strong, though not too strong, self-storage occupancy and rental rates, new construction and heightened competition.

It is anyone’s guess how long the relatively stable and steady market can last – and there are those who believe the Seattle-Tacoma market may soon experience major turbulence due to what they see as recent overbuilding.

For now, though, most industry players say the overall Seattle-Tacoma market is humming along quite nicely.

“The whole industry is doing well here,” says John Eisenbarth, vice president of operations at West Coast Self Storage, which manages 94 facilities in Washington, Oregon, California and Nevada. “Demand is high and there’s a lot of money flowing into the industry.”

“The Seattle metro area is such a strong market,” says Cory Sylvester, a principal at Radius Plus. “It has a lot of jobs, and it’s a scenic area where people want to live and work.”

All of which translates into an attractive self-storage market, where the occupancy rate is just under 93% for the 454 facilities tracked in the Seattle-Tacoma region. Prices are currently hovering around $200 per month for a 10-foot-by-10-foot climate-controlled unit.

The solid numbers are ultimately driven by the region’s population growth over the decades, rising from 1.7 million in 1980 to 2.7 million in 2000 and then to 3.8 million today, according to data.  Driving those numbers has been the Seattle-Tacoma area’s emergence as a major tech hub, with both Microsoft and Amazon calling the region their home.

The net result: A healthy self-storage market stretching back more than a generation.

“Across the board, it is a strong market,” says Melissa Shandor, chief strategy officer at The Storage Acquisition Group. “The market is consistent, with tracked, gradual growth.”

One industry number that jumps out is the area’s overall penetration rate of 6.8, or the number of square feet of self-storage space per capita.  That’s higher than the national penetration rate of about 6, but it’s far from being considered oversaturated.

There is one major cause for concern: Approximately 1.9 million square feet of new self-storage space in the planning and construction stages in the Seattle-Tacoma area.

With the potential of adding more than 7 percent to the region’s current 25.4 million square feet of storage space, the possibility of oversaturation looms in the future.

Patrick Gilroy, co-owner of Stor-House Self Storage, is seeing the burst of new construction first hand.  Across the street from his 730-unit facility in Bellevue, a city of 144,000 located across Lake Washington from Seattle, Public Storage is tearing down an old facility and planning to build a new 1,000-unit storage facility, he says.

Once the Public Storage project is finished, Gilroy says he’s expecting “downward pressure on rental rates” in the area.

In general, Bellevue and other growing communities surrounding Seattle and Tacoma are seeing the highest number of new construction projects, Gilroy and other industry experts agree.

“Bellevue and other places are getting spillover from Seattle,” says Gilroy. “People are moving further out, especially since COVID-19. Remote work has helped the suburbs.”

“Investors should pay attention to the activity and data surrounding Seattle and Tacoma,” agrees TSAG’s Shandor. “The story is being told in the tertiary markets.”

Not that it’s easy to build or do business in those surrounding communities, the entire Puget Sound area is surrounded by water, mountains and evergreen forests, thus limiting where developers can build and driving up land prices in the process. Then there’s tough zoning laws that contribute to the area’s image as a “high barrier” storage market.

Andrew Burachinsky, an advisor at The Storage Acquisition Group, says the Seattle-Tacoma market clearly has more pluses than minuses. “It’s been experiencing an influx of young professionals moving there, helping the housing market, and that’s keeping the self-storage rental rates high,” he says.

But he warned recent new construction is threatening to disrupt the usually stable Seattle-Tacoma market. “Unfortunately, it could be over-supplied soon,” he says. “There could be some major adjustments in prices.”

West Coast Self Storage’s Eisenbarth agrees the potential is there for market turbulence ahead. “I don’t have a crystal ball, but over the next three or four years new supply could cause some price pressures,” he said.

Still, Eisenbarth, a member of the Washington (State) Self Storage Association’s board of directors, says he’s bullish on the Seattle-Tacoma self-storage market in general.

“Acquisitions have become more of a scene this year, compared to past years,” he says, noting the increasing flow of investment dollars into the popular Seattle-Tacoma region.

Seattle-Tacoma at a Glance

Population	3.8M
Number of storage facilities	454
Square feet of storage	25.4M
Penetration Rate	6.7
Occupancy Rate	92.94%
Median Household Income	$91,068

  Note: Data from Radius+, U.S. Census

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: 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.