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March 23, 2021June 7, 2021

TSAG Market Analysis: Chicago

By: The Storage Acquisition Group

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

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

But all is not well in Chicagoland.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Greater Chicago at a Glance

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

Note: Data from Radius+

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.

February 24, 2021March 23, 2021

TSAG Market Analysis: Greater Detroit

By: The Storage Acquisition Group

Detroit skyline in michigan, usa at sunset

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Greater Detroit at a Glance

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

Note: Data from Radius+

February 1, 2021February 8, 2021

TSAG Market Analysis: Providence, RI

By: The Storage Acquisition Group

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

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

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

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

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

Why no big fall in prices with the added supply?

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Is it getting too popular?

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

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

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

Providence, Rhode Island at a glance

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

Note: Data from Radius+

December 4, 2020December 14, 2020

TSAG Market Analysis: Boston

By: The Storage Acquisition Group

Industry experts have some advice about the Greater Boston self-storage market: If you look hard enough, the opportunities are there.

As is the case in other metropolitan areas across the nation, the Boston-area market has seen its share of new self-storage construction and conversions in recent years, with new facilities adding 14.5 percent to the region’s overall 19.4 million square feet of self-storage space since 2016, reports Radius Plus, the online industry research and analytics firm owned by Union Realtime.

And there are another 34 facilities either planned or under construction in the Boston metro region, roughly defined as eastern Massachusetts and parts of southern New Hampshire and northern Rhode Island. That represents a 10.78 percent increase in new supply potentially coming on line soon, according to Radius Plus data.

Needless to say, the surge in new construction and conversions has led to rental price pressures in some submarkets within the overall Boston area, according to data and anecdotal reports.

But here’s the thing: Despite all the building-and-renovating activity, Boston’s so-called “penetration rate,” or the amount of self-storage space per capita, remains at only 4, below the national penetration rate of 5.8 and well below the rates seen in other major metropolitan statistical areas (MSA) of Boston’s size, according to data.

Add in the facts that Greater Boston has one of the highest median household income levels in the nation, that 51 percent of the population currently live in rental units, and that the barriers are high for newcomers to crack into the market, and you have all the ingredients for self-storage success in the region.

“Boston is a great market,” says Cory Sylvester, a principal at Radius Plus. “It’s not a fast-growing area like you see in the Sunbelt, but it’s still growing and there are so many pluses to the area.”

Thomas Palumbo, a senior director at Sitar Realty Co., and senior advisor with The Storage Acquisition Group agrees that most of Boston’s fundamentals lead to one general conclusion: It’s a top-tier self-storage market for buyers, sellers, and operators alike.

Even if a projected two million square feet of new space is added to the market in the coming years, the Boston area should be able to absorb it. “I don’t think it’s going to disrupt the market much at all,” said Palumbo.

Actually, Palumbo and others have a caveat to that conclusion: It all depends on where new facilities are built in the Greater Boston area. And that gets back to the original advice about looking carefully for opportunities in Boston.

The fact is some areas of Greater Boston have indeed been overbuilt in recent years.

According to Radius Plus data, the Marlborough-Framingham area, known as Boston’s MetroWest region, has seen a 33 percent increase in new supplies over the past three years. The spike in self-storage space is partly in response to a surge in new multifamily-housing construction in the MetroWest area.

“Prices have definitely been hit hard in some of the outskirts of Boston,” Sylvester.

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Tell that to Steve Tranni, director of operations for Stor U Self, owner of five self-storage facilities outside Boston.

“There’s definitely been overbuilding,” says Tranni, a member of the Northeast Self-Storage Association’s board of directors. “A lot of new facilities have opened up in recent years.”

Still, a typical 10-foot-by10-foot, climate controlled rental unit in Boston’s suburbs goes for about $140 a month, a very solid price, although costs are high in general in the Boston area.

Despite all the new construction, Tranni’s company is currently developing new self-storage facilities in Quincy, just south of Boston, and in Plymouth, about 40 miles south of the city. But Tranni stressed: Stor U Self did a lot of market research before deciding to embark on the projects.

“We are very, very cautious about buying or building new facilities,” he said. “You really have to slow down and not be stupid about it.”

Then again, one can simply try to build or buy in the city of Boston itself, a generally underserved city compared to other cities around the country. Boston rents for 10-by-10 climate-controlled units easily go for around $200 and up per month.

The city of Boston simply hasn’t seen as much construction-and-conversion activity as in its surrounding suburbs, due largely to classic high barriers to entry in the city, such as a scarcity of affordable land and zoning restrictions. Still, it’s generally believed that once you get a facility in Boston, you should be in good shape.

And Tranni said his company is indeed in the process of buying a facility in the city proper, in a location he declined to disclose.

Connie Neville, a managing director at SVN Storage Realty, says the Boston-area self-storage market is indeed tricky and difficult to navigate, almost as tricky and difficult to navigate as Boston’s infamously convoluted and confusing roadways.

The stats show that Boston is underserved when it comes to self-storage facilities. But a large percentage of Boston homes have attics and basements that cut down on the need for self-storage services, she said.

Then there’s the issue of scores of colleges and universities in the Boston area, from internationally known universities like Harvard, MIT and Tufts to less well-known and yet respected schools like Simmons, Bridgewater State and UMass-Lowell. The tens of thousands of students flowing in and out of the Boston area every year leads to a booming, though only seasonal, business for many operators.

Despite the market’s intricacies and challenges, the bottom line for Neville is that Boston remains a “very robust and very competitive” self-storage market.

Justin Quinto, a brokerage advisor at Investment Real Estate LLC, agrees. “Boston is one of the top MSA markets to be in, no doubt,” he said. “It’s densely populated and has high income. It’s a tremendous market.”’

Boston Self-Storage Market at a Glance:

Population	4.9 million
Square Feet of Space	19.4 million
Number of Facilities	417
Penetration Rate	4
Supply Growth (past 3 years)	14.5%
New Supply (pipeline)	10.78%

Note: Data from Radius+

November 2, 2020

TSAG Market Analysis: Northern NJ

By: The Storage Acquisition Group

Dusk falls on the urban downtown metro area of newark new jersey

Some consider northern New Jersey a mere “drive-thru” area as they travel by car between New York City and Washington D.C. But to others, particularly those in the self-storage industry, northern New Jersey is a lush region of the Garden State – with a dense population, the third highest median household income in the country, a high concentration of multifamily dwellings, and close proximity to the nation’s largest metropolis, New York City.

“It’s mostly bedroom communities, not a drive-thru area,” says Richard Monteforte, chief operating officer and an owner of American Self Storage in New Jersey. “It’s a great self-storage market in a great state.”

And it’s considered to be a largely underserved self-storage market, with a penetration rate of 4 square feet of self-storage space per capita, well below the national average of 5.8 square feet per capita, according to data from Radius Plus, a self-storage data analytics and research firm.

Like other markets across the country, northern New Jersey, with its mix of gritty urban cities and affluent suburban towns, has definitely seen its share of new self-storage facilities coming on line in recent years, mostly the result of conversions and in-fill projects.

The cities of Newark, Paterson, and Elizabeth, all tucked close together just southwest of Manhattan, saw a combined 5 percent increase (or 632,000 square feet) in deliveries of new self-storage space in 2018, an 8 percent jump (986,000 square feet) in 2019 and a 6 percent increase (734,000 square feet) so far in 2020, according to Radius Plus. There is an additional 10 percent of new supplies under construction in the immediate Newark/Paterson/Elizabeth area alone, according to data.

Cory Sylvester, a principal at Radius Plus, says the numbers clearly show northern New Jersey has one of the higher new-construction rates in the nation. But the “supply has been added in pockets,” such as in southern Paterson, where new self-storage space has increased 35 percent in recent years and sent rental prices downward by 15 percent, Sylvester says. Meanwhile, many parts of the region have seen little new supply in recent years.

Overall, the demand for self-storage space remains strong in northern New Jersey, precisely because of the relatively low number of self-storage facilities serving the densely populated area of the Garden State. In addition, the entire New York metropolitan area, which includes parts of northern New Jersey, has a penetration rate of only 2.95 square feet per capita – and urban residents need self-storage space somewhere.

The bottom line: Northern New Jersey’s self-storage industry is a beneficiary of the general lack of supply in the entire New York metropolitan region – and it’s an area capable of sustaining a surge in new supplies and yet rebounding within a relatively short time, Sylvester and other industry officials say.

In addition, northern New Jersey’s population is growing, especially since the onset of the coronavirus pandemic, as residents in New York City leave the city in droves for more suburban/country settings as COVID-19 rages in urban areas.

“We’ve seen a big exodus out of New York City,” says Phil O’Hara, head of operations at Delta Self Storage, which owns two facilities in northern New Jersey and one in New York City. “It’s been good for New Jersey (self-storage) operators. There’s still plenty of demand out there.”

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Before the pandemic hit the nation last March, self-storage prices in northern New Jersey were largely flat, a relatively encouraging phenomenon in a region that’s seen a solid increase in supplies. Over the past 12 months, prices have been running in the $140 to $165 range for 10-foot-by-10-foot climate-controlled units in the general region, according to Radius Plus data.

“It is a great market,” Bill Sitar, New Jersey advisor for Storage Acquisition Group, says of New Jersey in general. “It’s the most densely populated state in the nation and has among the highest per capita income as well. We have the third busiest port in the country and are located in between NY and Philly/DC.”

He added e-commerce wants to be in northern New Jersey precisely because of its convenient proximity to so many major U.S. metropolitan markets. Even northern New Jersey’s minuses are considered pluses. The entire state is viewed as a “high-barrier” region, with tough zoning laws and expensive real estate, making it difficult for developers to build new facilities and for investors to buy existing properties.

Yet those high-barriers act to protect existing self-storage operators, said American Self Storage’s Monteforte, who has been active over the years in the New Jersey Self Storage Association.

“At association meetings of self-storage (operators), I used to tell people, ‘You’ll never see a happier bunch of guys’ because we were in a great industry in a great state,” says Monteforte.

Says Storage Acquisition Group’s Sitar: “You are going to be paying top dollar for assets in this market and the sellers are very sophisticated. Additionally, with much access to capital deals are very competitive.”

Nicolas Malagisi, national director of self-storage at SVN Commercial Real Estate Advisors, says the recent pandemic was initially hard on some New Jersey’s self-storage operators, due to strict emergency social-distancing and lockdown rules.

“But business is largely back to normal,” he said. “It’s proved to be a very resilient market. I’m very optimistic about it across the board. It’s a good market.”

Radius Plus’s Sylvester agrees the future looks bright for northern New Jersey’s self-storage sector, ticking off its proximity to New York City, its high median income and its dense population. “There’s so much going for it,” he said.

Northern New Jersey At A Glance (Newark, Paterson and Elizabeth areas)

Combined Population	557,7000
2019 New Deliveries	986,000 (8% Increase)
New Facilities Under Construction	10% Increase
Rental Rate 10×10 CC	$140-$165 per month
Square Feet/Capita	4

Note: Data from Radius+

October 1, 2020

TSAG Market Analysis: Washington DC & Baltimore

By: The Storage Acquisition Group

Separated by only 40 miles, Washington D.C. and Baltimore are often considered by the media and other industries as one giant metropolitan area.

If so, it’s definitely a tale of two cities within the D.C.-Baltimore market. When it comes to the self-storage industry, D.C. is continuing to see a strong increase in supply while Baltimore is seeing a distinct slowdown in new construction, industry officials say.

“They’re really different markets with an overlap in the middle,” says Gaby Sader, a partner and executive vice president of Boardwalk Storage Solutions, a facilities builder for investors in the D.C-Baltimore region.

For the immediate District of Columbia area, the self-storage market is seeing little let-up in investor interest, with new construction underway that would expand its overall supply by 6.7 percent, says Cory Sylvester, a principal at Union Realtime, the data analytics and research firm that closely tracks self-storage across the nation through its branded Radius Plus platform.

According to Radius Plus, the D.C. area – which includes the suburbs of Northern Virginia and parts of southern Maryland – has experienced a three-year growth in the supply of 15.5 percent.

“That’s definitely high growth,” said Sylvester. “Washington has been going strong now for a while.” New construction has been particularly intense in the core city, less so (though still strong) in the outlying suburbs.

The overall new supply has definitely had an impact on rental activity in recent years in the D.C. area, with prices falling from the $160 range for 10-foot-by-10-foot climate-controlled units in September 2017 to $145 in February 2020, just prior to the coronavirus outbreak and national economic downturn, according to Radius Plus data.

“D.C. self-storage has definitely been overbuilt,” says Todd Manganaro, chief executive of ezStorage and president of the Maryland Self-Storage Association. ezStorage owns about 50 self-storage facilities in the D.C.-Baltimore area.

Prices in the nation’s capital sank to as low as $125 this past spring during the depths of the pandemic in the Northeast, but they’ve since bounced back to about $165, according to Radius Plus. The reason: D.C. is a dynamic, growing city with a solid federal-government employment base and an expanding high-tech sector, industry officials say.

Despite all the recent new construction, the area’s so-called “penetration rate” – or the square feet of self-storage space per capita – remains at about 5.13, below the national rate of 5.8 percent.

And that and other factors make D.C. an attractive market for investors.

“The population continues to grow and incomes continue to climb,” says Monty Spencer, CEO of Storage Acquisition Group in Yorktown, Virginia. “D.C. and the surrounding metro areas are very sought after environment to live and work and prices for residential real estate are very high in the district, which leads to fantastic long-term stabilization and rent growth.”

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D.C.’s negatives? High real estate taxes and sometimes difficult zoning restrictions, Spencer and others say.

As for the considerably smaller Baltimore area, its image has been banged up in recent years, with the city portrayed as a virtual social-and-criminal basket case in TV dramas such as HBO’s “The Wire.”

But Chris Brandaleone, chief executive of RightAway Storage, said the impoverished image of Baltimore’s is unfair. The city actually has a large population of young professionals living in upscale and renovated multifamily buildings – and they tend to be transient professionals who often need self-storage space.

Indeed, the economic data back up Brandaleone’s assertion of Baltimore being a stronger and more dynamic market than portrayed in the media. As for self-storage space, the city saw a 14.6 percent increase in supply over the past three years, according to Radius Plus data. The Baltimore area’s penetration rate is 5.27 percent, also below the national average.

Yet recent new construction has definitely taken its toll in the Baltimore area, with prices for climate-controlled units falling from about $135 per month in September 2016 to $120 just prior to the coronavirus outbreak in March. Prices plunged this spring to around $105 per unit, but have since rebounded to about $130 as of mid-September, according to Radius + data.

Meanwhile, building has recently ground to a virtual halt in the Baltimore area, with new construction underway expected to add only 0.9 percent to the Baltimore area’s overall self-storage supply, according to Radius Plus.

All in all, Storage Acquisition Group’s Spencer said the Baltimore area’s dense population and location smack in the middle of the Eastern seaboard leaves it “well-positioned to weather short-term volatility and provide long term stable returns to investors.”

Like the District of Columbia, one of Baltimore’s greatest drawbacks is its high real estate taxes, Spencer says.

RightAway’s Brandaleone agrees that the long-term fundamentals for the Baltimore area are strong. Indeed, his firm is currently building a new 110,000-square-foot facility in Baltimore County, just outside of the city.

The lease-up period for the facility may take longer than hoped and expected, but it will be worth it in the long run, said Brandaleone.

Noah Mehrkam, chief executive of Self Storage Plus, which manages 42 facilities in the general D.C.-Baltimore market, said both cities, and their surrounding suburbs, have seen overbuilding in recent years.

Still, Mehrkam, whose company also develops self-storage facilities, said both D.C. and Baltimore remain attractive for investors – as long as they’re careful and patient.

“It’s harder to find good sites these days, compared to seven or eight years ago,” he said. “But we’re going to keep looking for good micro-markets. You have to be prepared for the long-term slog.”

The Storage Acquisition Group’s CEO, Spencer agrees stating “We are very actively seeking institutional-grade investment opportunities in each market.”

Self-storage Markets at a Glance:

Washington, D.C. Metropolitan Area

Square Feet of Space	26.9 Million
Number of Facilities	454
Population	6.1 Million
Penetration Rate	5.13
New Supply Increase in Pipeline	15.5%

Baltimore Metropolitan Area

Square Feet of Space	12.9 Million
Number of Facilities	213
Population	2.9 Million
Penetration Rate	5.27
New Supply Increase in Pipeline	14.6%

Note: Data from Radius+

August 24, 2020

TSAG Market Analysis: Philadelphia

By: The Storage Acquisition Group

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.

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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+

July 28, 2020July 28, 2020

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.

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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+

June 26, 2020July 28, 2020

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.

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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.”

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June 10, 2020June 26, 2020

TSAG Market Analysis: South Florida – Miami

TSAG Market Analysis: South Florida-Maimi

By: The Storage Acquisition Group

Miami is holding its own despite building boom and economic storm clouds.

Despite a surge in new supplies over the past three years, the Miami-area self- storage market is considered in relatively good shape to withstand tough economic times ahead for Florida and the nation as a whole, according to industry data and experts.

There’s no doubt that Greater Miami, which includes Miami, Fort Lauderdale, and West Palm Beach in the tri-county area of southeast Florida, has seen its share of new self-storage supplies, rising just over 5 percent last year and by 15.8 percent over the past three years, according to Radius+ data.

“That’s a significant amount of new supply over three years,” says Cory Sylvester, a principal at Radius+.

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Not surprisingly, the surge in supply has led to price pressures in southeast Florida, with prices for climate-controlled units falling about 20 percent over the past year, according to data. Prices for non-climate controlled units fell by just over 12% for the same time period.

And more supplies are on the way for Greater Miami, with new self-storage facilities currently under construction expected to add about 8 percent more space to the area. If all tentatively planned facilities are included, Greater Miami’s supply could theoretically increase by 18.6 percent to 42.2 million square feet in the coming years, according to data.

Those supply projections are slightly higher than the national average estimate of around 3.3 percent growth of under-construction facilities and nearly 10 percent growth when planned and permitted facilities are included, according to Radius+ data.

But even with slightly higher supply numbers in the tri-county area, many Greater Miami self-storage players and industry observers are still bullish on the region for a number of reasons.

First, they point to the fact that Miami, the nation’s seventh-largest metropolitan area, is faring better than many other major markets across the nation in terms of supply. Over the past three years, Miami ranks 12th in supply growth, compared to No. 1 Denver’s 27.6 percent growth, according to Radius + data.

In addition, Greater Miami was in a better position to absorb more self-storage facilities at the start of the past decade’s nationwide building boom. Even after the surge in new facilities, Greater Miami’s self-storage penetration rate today is hovering at about 6 net rentable square feet per person, roughly in line with the national average of about 6, according to Radius+.

In addition, Miami’s lease-up period for new facilities remains about 3 to 4 years, roughly the national average and considerably lower than the up to 5 years it can take to fully lease new facilities in other hot markets, industry officials say.

There’s one other thing in Greater Miami’s favor: Earlier this year, Miami’s planning board passed a ban on construction of new self-storage facilities near mixed-use residential areas and a 270-day moratorium on any new storage facilities in general.

While no one in the industry likes anti-self-storage sentiments in general, the fact is that new restrictions on construction and conversions help existing self-storage owners by limiting the introduction of new facilities into the market, officials say.

The bottom line: Greater Miami, whose population is still growing (although slower than in past decades), is in a better position to prosper moving forward than many other major markets in the nation.

“In the long-term, Miami is in good shape,” said Brian Cohen, president of Andover Properties LLC, developer, owner and operator of 41 facilities in 12 states, most of them along the East Coast, with one facility in Miami and one in Fort Lauderdale.

Confirming what others are seeing, Cohen said the occupancy rate in its Miami-area facilities has remained in the 90 percent range, despite new supplies coming on line, with absorption “going pretty well,” despite competitive price pressures.

Scott McLaughlin, executive vice president of Sentry Self Storage Management, which operates two facilities in Miami, said Miami got hit hard by a recent surge in new construction “But it’s not necessarily an oversupply problem,” he said. “It’s been an all-delivered-at-one-time problem.”

He noted that Extra Space, a large real estate investment trust, recently opened a new 75,000-square-foot facility only three blocks away from a 50,000-square-foot Sentry facility in Miami, creating price pressures.

But he said occupancy nevertheless held steady at his facility, indicating demand is still strong in Miami. McLaughlin attributed some of the strong demand in Miami to new multifamily housing projects being built in the city, providing additional potential customers for self-storage operators

As for the new self-storage building restrictions in Miami, it can only help existing owners, said McLaughlin. “If it slows up development for a year or so, that’s a year in which we can absorb what’s coming on line,” he said.

But what about the coronavirus emergency and the subsequent economic downturn caused by stay-at-home policies across the U.S.?

Industry officials say they’ve noticed additional price pressure in Miami, as well as in other cities. But they say the self-storage industry, often described as a “counter-cyclical” and “recession-resistant” industry, should be able to hold its own during the current national economic downturn.

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