Commercial Property Executive (CPE), a media brand specializing in commercial real estate news and analysis, has published a list of the five top-performing markets for self-storage development in the United States. The ranking is based on projects underway or planned space as a percentage of total inventory as of August. It was compiled using data from Yardi Matrix, the self-storage data-services platform offered by management-software provider Yardi Systems Inc., according to CPE.
Although many markets are enjoying an improvement in rents, development activity is beginning to show the effects of the coronavirus pandemic and economic fallout. About 147.2 million square feet of storage space was under construction or in the planning stages, representing 8.8 percent of total stock. The new-supply pipeline grew by 20 basis points over the previous month, however, development activity remained flat or contracted in more than half of the top 31 markets tracked by Yardi Matrix, CPE reported. In addition, 33 projects were abandoned in August.
The top market on the list is New York City (NYC), with 64 projects under construction and 100 in the planning stages, totaling more than 12.3 million square feet. The new supply represented 18.5 percent of existing inventory, up 50 basis points month-over-month. The NYC storage market is also facing recent changes made to the city’s Industrial & Commercial Abatement Program, which provides tax relief for ground-up and conversion projects, according to GlobeSt. Many storage projects will no longer be eligible for tax abatement, which could make a development unprofitable, CPE stated.
Las Vegas ranked second on the list, however, development activity has been mostly idle during the pandemic, with three facilities comprising 293,680 square feet completed this year. About 2.8 million square feet is under construction or in the planning stages, accounting for 16.2 percent of the city’s 17.2 million-square-foot inventory. It has 21 projects in planning and 14 under construction, all slated to be complete this year or in early 2021.
Rounding out the top five are Sacramento, Calif.; Portland, Ore.; and San Jose, Calif. Sacramento’s self-storage market is grappling with oversupply, with the per-person inventory at 7.9 net square feet, slightly above the national average of 6.6 net square feet. As of August, 2.8 million square feet was under construction or in the planning stages, accounting for 15.8 percent of total stock.
The self-storage development pipeline in Portland contracted slightly. The nine projects under construction and 18 in the planning stages, encompassing 2.2 million square feet, accounted for 15.2 percent. The city’s self-storage inventory per person is 6.9 net square feet.
San Jose’s high barrier to entry has helped keep it from becoming oversupplied. The city has 9.4 million square feet of storage space, making the supply per person 4.7 net square feet. As of August, San Jose reported 1.4 million square feet of storage planned or under construction, accounting for 15 percent of existing inventory.
CPE is an integrated resource for executives and companies that own, manage, invest in or develop commercial real estate. With an emphasis on executive profiles and industry and economic data, it offers reports covering finance, legal and regulatory issues, property management, sustainability, technology, and other areas.
Sources:
Commercial Property Executive, Top 5 Markets for Self Storage Development
GlobeSt.com, NY Storage Developers Freeze Projects Following New Tax Policy
