Over the last five years, Canada’s supply of self-storage has ballooned. The three most developed urban markets are the Vancouver Lower Mainland, Greater Toronto and Halifax, each of which has 2 to 2.5 square feet per capita. Considerable new development also is underway in Edmonton, Calgary and the province of Quebec.
Self-storage per capita in Canada is about half that of the United States, possibly because Canadians aren’t nearly as mobile. Also, there is no military-market segment, whereas soldiers will account for 8 percent of all U.S. tenants by year’s end, according to Self Storage Association predictions. Occupancy rates are higher in Canada. In my opinion, this is due to lower supply and a healthy economy over the past few years.
Details on individual urban markets follow.Vancouver
In Vancouver Lower Mainland nearly 20 new facilities have opened, raising the amount of self-storage square footage from 1.83 to an estimated 2.5 per person by January.
Leading industry player Public Storage has strengthened its presence in the Lower Mainland with four additional facilities and a fifth in development, accounting for a total of 300,000 square feet. Another major developer, Maple Leaf, has doubled the size of its portfolio, adding three new facilities with two more in the works. Occupancies are high in all sub-markets except the North Shore and the Tri-Cities, each of which are struggling with the influx of 300,000 square feet of new storage space to the area.
Of major concern to self-storage owners and developers is a new B.C. Transit levy on surface parking, which may result in an annual tax of $30 per parking space. The tax has sparked substantial increases in property-assessment appeals for 2006.
Market statistics also show:
- The Vancouver Lower Mainland will have a supply of 6.65 million square feet of self-storage by the year’s end.
- Rents range from a low of $12 per square foot to $26 per square foot for a new urban facility.
- Occupancy rates have risen from 88 percent to 95 percent, excepting the Tri-Cities and North Shore areas.
- Rentals have increased from $9.60-$16.20 to $12-$26.
- Cap rates have dropped from an average of 10.25 percent to 8.25 percent.
- Recent construction costs for new concrete tilt-up buildings are $65 to $70 per square foot (hard and soft costs).
TorontoMetro Toronto has an estimated 5 million square feet of self-storage, or roughly 2 square feet per capita—with the industry undergoing a growth spurt, according to Joe Kormos of Canadian Storage Centres Inc. Another .5 to 1 square foot per capita is reportedly under construction or in the development process.
An equal amount of storage is available in the Greater Toronto area. Overall, occupancies are in the range of 85 percent because of new supply. Developers report that 60 percent of new customers are drive-bys, attracted by high-profile locations rather than through Yellow Pages advertising. Also:
- Rents have risen since 2001 from $11-$18 to $20 per square foot.
- Cap rates are between 9 percent and 11 percent, a slight dip from recent years.
WinnipegFraser Kulba of Storageville reports that Winnipeg has been discovered by out-of province and U.S. self-storage developers. They have built four new facilities in the last five years and completed two large conversions. Kulba estimates the increase to be 200,000 to 250,000 square feet. Storageville is in the process of constructing a 66,000-square-foot facility. Few viable retail locations remain, according to Kulba.Montreal
The estimated supply of self-storage in the Montreal trade area is less than 1 square foot per capita; the number is anticipated to rise to 1.5 to 2 square feet with proposed new construction. Turan Kalfa, owner/developer of the Depotium portfolio, says he had an offer on his eight-facility portfolio in 2005; when the transaction fell through, he decided not to sell but to double the size of his holdings. Two recent sales (to an Ontario company) were at a 9 percent cap rate, but the majority of sales are in the 9.5 percent-10 percent range, according to Kalfa.
Due to very stringent bylaws, self-storage development on Montreal Island is limited to conversions. Occupancy averaged 80 percent from July to April, exploding to 100 percent in May and June to accommodate “moving day” on June 30 when all annual leases expire. Rents average $14 per square foot annually on the Island and $12 annually in suburban locations.
Overall, occupancies have improved and lease-up time frames have shortened.Alberta
The Edmonton and Calgary markets remain strong with significantly higher occupancies. The last comprehensive study was done in 2003, indicating a supply of 1.05 square feet per capita in 37 facilities. Since that time, three or four new facilities have been constructed. Vancouver-based Maple Leaf is developing two additional multistory facilities, each offering 1,400 to 1,500 units.
In May 2005, Public Storage announced the purchase of an existing store in the Harvest Hills area of Calgary at $123 per square foot of net rentable area for 73,000 square feet. The facility was a year old at the time of sale and represents the first purchase of an existing facility by the partnership. The most recent previous sale is believed to be Storagemaxx’s May 2003 purchase of a 50,000-square-foot facility at a reported cap rate of 10.97 percent. The most recent Calgary self-storage land sale was to Maple Leaf at $15 per square foot of land for a 4.2-acre site. Also:
- Rental rates rose from $11-$16.36 per square foot per annum to $14-$18.
- Occupancies are reportedly very high.
- Storage supply in Edmonton is estimated at 2 square feet per capita.
SaskatchewanIn April 2004, Storagemaxx acquired Rock Solid Self-storage, a four-facility portfolio comprising one store in Edmonton (Alberta), two in Saskatoon and one in Regina. The reported cap rate was in the range of 10.5 percent and overall occupancy was at 82 percent.Halifax, Nova Scotia
The Halifax trade area is within a 7-mile radius of the downtown core. The amount of self-storage is estimated at 2.19 square feet per person. Occupancies reportedly range from 86 percent in the winter months to 100 percent in the summer months, and:
- Average rents are $12-$15.50 per square foot.
- There have been no recent sales of facilities, but estimated cap rates are 9 percent to 9.5 percent.
- The total square footage of self-storage is approximately 635,000 square feet.
Candace Watson is a professional real estate appraiser who has specialized in the valuation of self-storage for more than 25 years. Her company, Canadian Self Storage Valuation Services, conducts regular surveys of self-storage supply, occupancy and rents in the Lower Mainland, and prepares feasibility studies for prospective developers throughout the province. Ms. Watson has appraised more than 40 percent of facilities in the Lower Mainland. For more information, call 604.681.2929; e-mail [email protected].