When people look back at the end of a year they like to see certain things. Did they do anything? Did they grow—physically and metaphorically? Did they just watch the world go by or were they actively trying to make their mark in it? Does the future look any better for what they did or didn’t do?
The same questions could be asked for a business—self storage and otherwise. As an industry was there any activity? Did the industry grow? Whether or not it did, is it poised for future growth?
Does the future look any better for the self storage industry than it did a year ago?
The answer across the board is an easy one—yes.
The self storage industry is by and large one comprised off small business owners with a small number of facilities in their portfolio and single facility owners. However, the market has been an active one in recent years for the industry and last year was no different.
Among the major real estate investment trusts, there was over $2 billion in transactions involving self storage properties in 2013; an increase of half a billion over the 2011 and ’12 statistics. One company spent over $1 billion alone! Extra Space Storage accounted for $586 million in transactions involving 78 facilities.
So while a lot of money and facilities changed hands there was not a lot of activity on one front—new construction. According to a report by MJ Partners Real Estate Service there were just 221 self storage facilities constructed in 2013.
“Construction financing remains difficult to obtain for many smaller, private developers, requiring more equity capital to fund and carry project throughout stabilization,” MJ Partners said.
In spite of the demand for space lenders are still nervous when it comes to approving loans for new facilities when it is less expensive to convert an existing structure in to a self storage facility.
What does this mean for the industry? It depends who you listen to. Some will say that the reluctance to approve lending for new facilities is a lack of confidence in what has been one of the most reliable investments in recent years. Others will look at the REITs buying up so many facilities and say the base of the industry is better since economies of scale will allow them to weather a down turn in the industry should one occur.
“REITs on Self-Storage Buying Spree.” GlobeSt.com; 04 March 2014.
2013 SSA Fact Sheet; Self Storage Associaton.