Commercial Investment Real Estate is the magazine of the CCIM Institute, the leading provider of commercial real estate education. CIRE covers market trends, current developments, and business strategies within the commercial real estate field.
Issue link: http://cire.epubxp.com/i/700533
July | August | 2016 The self-storage market has "meaningful runway left with lots of demand," according to Ben Vestal, president of Argus Self-Storage Sales Network in Aurora, Colo. Nationally, occupancy rates are north of 90 percent, and revenue growth of 5 to 7 percent is expected in 2016, he says. Vestal expects 2017 to be stable, as well, while in 2018 and 2019 the self-storage market will start to fl atten out. "At Argus, we expect 18 to 24 months left of capital appreciation in the market," he says. Currently, growing demand coupled with high barriers to entry and relatively low construction costs creates a winning formula for investors. As a result, Vestal has seen more institutional investors enter the sector and more consoli- dation of self-storage facilities. "This has led to very aggressive prices being paid for self-storage projects today," he says. National trends include improving professional management, enhancing internet marketing for self- storage facilities, optimizing websites for mobile phones, selecting better locations, and building more attractive, climate-controlled facilities. It's becoming a retail environment, according to Vestal. Today pro- fessional self-storage management encompasses revenue management, tenant insurance, street aware- ness programs, and digital marketing. "Some of the most important real estate is on the web," Vestal says. "Those who operate self-storage properties today need to make sure to be easily accessible to prospective tenants, especially on their mobile phones." The industry is maturing and changes in generations are building demand nationally. For example, more baby boomers are retiring, and millennials are moving back to the cities. "Those demographics need storage at different times," Vestal says. "Self-storage is recession resistant and is resilient through good and bad times. Today's storage market is driven both by more users and more investors." He cautions investors to pay attention to overbuilding and be diligent in researching self-storage locally. "Self-storage is a local industry, and prospective investors should look within a three- to fi ve-mile radius," Vestal says. by Sara S. Patterson Omega Properties in Mobile, Ala. "Whether a CCIM is involved in brokering, building, managing, or owning self-storage facilities, it's a great business." Since he entered the self-storage market- place in 1993, Barnhill has managed, bro- kered, and sold these facilities. Currently, he owns about 3,500 units in the Mobile area and manages the brokerage for self-storage facilities in Alabama, Mississippi, and the panhandle of Florida. Evolving Marketplace Self-storage has returned 101 percent to investors from early 2008 to 2011, out- performing all other REIT categories, according to data compiled by Bloomberg. Every year at least 11 million people in the U.S. stash some of their possessions into storage units. "People own a lot of things and inherit things that they don't want to lose," Barnhill says. " rough the years, we have had both population growth and more people learning how to use storage." For instance, major life events o en involve greater demand for self-storage, such as birth, BEST RETURN ON INVESTMENT Commercial Investment Real Estate Eduard Lysenko/Thinkstock