It Pays to Strike While It’s Hot in the Self Storage Industry

Posted on Sep 25 2013 - 8:27pm by Kim Kilpatrick

When it comes to the business world—self storage or otherwise—it can be tough to figure out not just when to get in to business but when to get out as well. The decision could mean the difference between needing millions or hundreds of thousands to get started. It could also mean the difference between making millions or just thousands when you get out.

The decision to enter the self storage industry had to be a tough one back before the market surge. Do you want to risk hundreds of thousands to get into an industry populated primarily by mom and pop style operations? Why isn’t there more of a corporate presence? If the industry was safe wouldn’t there be?

There is now. As the industry has become more and more of a reliable investment larger companies have gotten involved. That of course has caused the selling price to go—since demand is higher—making it more challenging to get in.

It also has made it more inviting to get out.

“Despite the fluctuation in interest rates, the self-storage sales market remains red hot,” Marcus & Millichap’s Richard A. Schontz says.  “We received several bids for this asset within two weeks at or near the asking price, with the winning bid coming at the asking price with very strong terms.”

Schontz recently closed on a sale in Colorado, Red Mountain Storage, for $5.2 million. In Atlanta, Morningstar Properties recently acquired  City Storage for $6.1 million. 

Not bad, right?

“The quality of the structure is Class A, and the trade areas feature an exceptionally dense population base with relatively high average household incomes, a major retail corridor and vibrant development. We’re confident that this acquisition positions us well to capture market share in one of Atlanta’s most dynamic infill neighborhoods and increase consumer demand for our services in the metropolitan region,” said Dave Benson, Morningstar Properties president. “

With more and more people finding the need to relocate the self storage industry will remain a hot commodity. After a few years of little to no new construction the market has become stable enough—or self storage has become a reliable enough investment—to warrant new construction. 

That, of course, means one thing. If you want in it will cost you, but if you want out it’s a sellers’ market. So don’t take the first offer; go for more!

Sources Used:

“Morningstar Properties Acquires Second Storage Property In Atlanta Region.” PRNewswire; 24 September 2013.

“Self-Storage Market ‘Red Hot’ for Trades.”; 23 September 2013.

“$5.2 Million Self-Storage Facility Changes Hands in Nevada.” National Real Estate Investor; 19 September 2013.