Self-Storage: Too Much Supply?
The self-storage sector is one driven by both home owners and apartment renters. Home owners rent storage space in an attempt to downsize. And apartment renters, who have limited floor space, need external storage, as well. According to Marcus & Millichap’s recent self-storage report for 2H 2018, “self-storage construction over this economic cycle has fallen short of the previous growth period,” even as “a record amount of storage space” has been coming to the market in 2018.
That record amount will lead to what Marcus & Millichap calls “pockets of oversupply risk in multiple metros,” which could mean an increased focus on vacancy rates. But the extra supply is anticipated to be a temporary factor, as demand should catch up in 2019, the report’s analysts say.
Meanwhile, investors seem to like the space, with competitive bidding boosting the average price per square foot by 11% over the 12-month period ending June 2018. While higher sales prices are encouraging owners to “bring their assets to market during the final months of 2018,” increasing lending costs due to interest rate hikes could be dampening buyer enthusiasm.
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