Update 11/22/17 – Absolute Storage Management (ASM), a self-storage owner and property-management firm, announced operating results for the third quarter of 2017. The company increased same-store revenue by 4.2 percent compared to the same period last year. Occupancy at its 57 same-store pool was 86.5 percent as of Sept. 30, compared to 84.4 percent during the third quarter of 2016, according to a press release.

ASM gained two management contracts during the quarter. The facilities are Hernando Self Storage in Hernando, Miss., and Scenic City Self Storage in Chattanooga, Tenn.

The company also reported that none of its properties suffered substantial damage from Hurricanes Harvey, Irma or Maria. However, the storms caused some issues including property inaccessibility, minor property damage, power outages, phone outages and staffing shortages, the release stated.

Founded in 2002, ASM operates 96 properties in 13 states. Headquartered in Memphis, Tenn., it has regional offices in Atlanta; Charlotte, N.C.; Jackson, Miss.; and Nashville, Tenn.

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10/26/17 – Sentry Self Storage Management, an industry management and consulting firm, has released its third-quarter 2017 operating results showing year-over-year improvement in revenue, net operating income (NOI) and occupancy. The company reported revenue growth of 5.9 percent and a decrease in expenses of 1.2 percent decrease, which resulted in an 8.6 percent increase in NOI compared to the same period in 2016.

Occupancy at Sentry-operated self-storage properties was 90.7 percent as of Sept. 30, a year-over-year increase of 50 basis points, according to a press release.

During the quarter, the company added one new third-party management contract for a facility in Spring, Texas. It’s also expanding two properties in Lakeland and Tampa, Fla. Both are expected to be complete during the third quarter of 2018. Additional projects include facilities under development in Deerfield Beach, Fla., which will open this year, and Hollywood, Fla., slated to open in fall 2018.

Based in Coral Springs, Fla., and founded in 1997, Sentry owns or manages 27 properties comprising more than 2.3 million net rentable square feet. The company’s services include consulting, development, feasibility studies, acquisitions, renovations and facility management.

 

Over the last three years, the self-storage real estate market has been the best ever. Interest rates have remained low; lenders are aggressive; industry information is getting better; values have risen rapidly; net operating income (NOI) has grown; and large institutional investors are buying assets. All this positive energy and performance has supercharged the development cycle, pushing the industry toward uncharted territory.

Historically, self-storage value has had more to do with where the industry is in the real estate cycle and market sentiment than actual property performance. Most independent owners still appear to be selling primarily because of life events, with few deciding to capitalize on the current market. However, it’s also apparent that institutional investors are taking notice of market conditions and choosing to sell some or all of their holdings, while being disciplined with regard to acquisitions. Concerns about new supply and rising real estate taxes seem to be at the forefront of everyone’s mind.

The prosperity of the current cycle has lasted longer and gone further than anyone expected. While the value of self-storage investments slowed in 2017, demand has remained strong. We continue to see new supply come online at a higher rate than previous development cycles, reflecting a planned-to-start ratio in the range of 40 percent to more than 50 percent in some areas.

The effects of new supply will be even more impactful in 2018, reflecting multi-year lease-up of prior-year deliveries. It’s anyone’s guess as to when the market will officially tip into the downward trajectory, but all signs point to this occurring in the next one to five years. In my opinion, self-storage is past the peak of the current real estate cycle. New supply and changing market dynamics will have an impact on performance during the next few years. The good news is, as we move through the cycle, there will be new opportunities, ushering in the upswing of the next.

Market Trends

In the last decade, self-storage has evolved from a mom-and-pop investment class to a mainstream, institutional asset class. The industry weathered the Great Recession and is now reaping the benefits of strong market fundamentals. Heading into 2018, let’s examine some key trends that will continue throughout the year.

Industry growth. One significant factor that makes self-storage a better bet in the long run than many other real estate types is its customer base is growing faster than the population. There are two key drivers providing the industry with tremendous leverage. First, many Americans have still never used the product. It’s estimated that 50 percent of new tenants are using it for the first time; and in many areas, there’s still unmet demand. Second, after about five to eight years, many operators report that an increase in business—more than 50 percent—comes from repeat customers.

If you combine those two factors, it’s clear consumers are still learning how to use self-storage, and they’re using it repeatedly once they do. The point is this type of growth isn’t limited to population and job increases. It gets a boost from consumers moving up the learning curve as well as ongoing changes in America’s housing products.

New supply. Development activity from 2017 and 2018 will deliver meaningful new supply to almost every major market. This will undoubtedly influence submarket fundamentals where new properties are being built. It’s no surprise that the regions seeing the largest influx of new development are those that have enjoyed great population and job growth during the last two to four years. Markets such as Dallas; Denver; Austin, Texas; Portland, Ore.; Atlanta; San Jose; and Tampa and Orlando, Fla., are all seeing a massive amount of new product.

In general, lease-up of new properties appears to be in line with the traditional two- to four-year pace, but rental rates seem to be slipping, with new properties having to offer larger than expected discounts to maintain their pace. There’s always an exception to the market, and if you’re one of the lucky developers who’s achieving faster than expected lease-up at or above your pro forma rental rates, the grass has never looked greener.

Consolidation. Though industry consolidation will continue in 2018, it’ll stem from a larger buyer pool than ever. The usual suspects, such as the real estate investment trusts and private-equity firms, will continue to dominate the larger, trophy acquisitions. However, we’ll also see more purchases from non-brand names and private real estate investors, as many take the plunge and enter the self-storage industry.

Most consolidation will come from mid-sized owner/operators because they’re willing to look at secondary and tertiary markets and buy smaller assets to grow their portfolios. The adage, “The only thing better than owning one self-storage facility is owning two or three” remains true.

Third-party management. Property-management firms continue to improve and create value for their clients. Companies like CubeSmart, Extra Space Storage and others have paved the way for third-party management by pushing revenue as well as standardizing and refining operational processes. This has allowed the industry to lead all real estate sectors in performance over the last 10 years.

These techniques, processes and capabilities have now trickled down to privately owned management firms, which provide a professional, economical product to markets and properties that haven’t previously had access to third-party platforms. This segment of the business will continue to grow and add value to the industry.

Technology. Advancements in this area have really grabbed hold in the self-storage industry over the last several years. The use of Web-based operating systems, electronic leases, mobile apps, kiosks and other automation tools, energy-efficient operating devices, and innovations from digital marketing firms will continue to allow owners to refine their operations and grow profitability through expense reduction, revenue increases and data-driven efficiencies.

2018 Outlook

The outlook for the self-storage sector remains cautiously optimistic. While the U.S. economy continues to accelerate slightly and new supply comes online, the industry should hold strong. There will undoubtedly be pockets of slowdown, but overall, the market should grow modestly in 2018. While we don’t know how long this current peak in property valuations will last, we do know that owners who take proactive measures to keep their properties competitive will be in the best position to capitalize on opportunities or protect against a potential downturn.

Ben Vestal is president of the Argus Self Storage Sales Network, a national network of real estate brokers who specialize in self-storage. Argus provides brokerage, consulting and marketing services to self-storage buyers and sellers and operates SelfStorage.com, a marketing medium and information resource for facility owners. It also offers panel discussions in which brokers from around the country share their insights on self-storage market fundamentals and economic trends in their regions. To access recordings, visit www.argus-selfstorage.com/presentations.html. For more information, call 800.55.STORE; e-mail [email protected].

The self-storage industry in the United States is close to 60 years old and has seen a lot of sunshine. At almost 8 square feet of storage per capita, I’d say that’s a walk in the sun!

The Asian self-storage industry dawned in Japan in the 1990s, followed by Hong Kong in 1997, Singapore in 2003, and then the rest of the region in the 2000s. While potential users in these countries are becoming more aware of self-storage, especially in the ever-densifying cities, the sun has yet to shine in countries including Cambodia, Myanmar and Vietnam. It has risen, however, in some major India and Indonesia cities.

Asian self-storage has its own nuances in ownership, real estate, culture, and consumer wants and needs. The early-bird and savvy investors, suppliers and consultants are finding their way and have been in touch with the Self Storage Association Asia (SSAA) to discover more about the ins and outs of the region.

As executive director of the SSAA, I’m happy to see these groups not only have the foresight to consider all that’s going on, but the desire to learn, get involved in the region and grow their network. In the three years that we’ve been hosting our annual Self Storage Expo Asia, we saw our largest contingent of attendees at our last event in Hong Kong in May. We’re expecting even more in Bangkok in 2018, and we look forward to experiencing the exchange of ideas among the 200-plus global professionals.

One of the major themes that emerged at the 2017 expo was, “It ain’t all rainbows and sunshine.” No doubt about it—the industry is hot. However, exciting opportunities generate excited investors. Some expect a quick return, and that’s not generally what happens. In Asia, property can be expensive (if it’s available), cultural differences abound, there are ownership limitations, there’s no freehold in some countries, there are language barriers, and there’s a lack of industry awareness on behalf of customers, governments, investors and lenders. The “glass-half-empty” folks may see these as unsurmountable obstacles, whereas the “glass-half-full” folks see them as pure opportunities.

To be sure, there’s still a lot of work to be done to get the Asian industry up to speed. A lot of this work entails education. Country by country, self-storage is understood differently and, therefore, faces different standards for fire safety, building and construction codes, and best practices. Doing the right thing isn’t always the easiest route, but it ensures a sustainable industry in the long term. Encouraging this is the sole directive of the SSAA. The need for higher standards has especially come to light since the tragic June 2016 fire in Hong Kong that killed two firefighters and brought the industry to its knees.

Catalyst for Learning

More than a year after the fire, the industry is essentially starting from scratch. Retroactive rules put in place by the fire-services and building departments have forced many existing storage operators to re-evaluate their budgets and consider reconstruction. Some investors have seen this as a fantastic opportunity given the perfect storm of potential: high demand coupled with increasingly smaller apartments, increased consumerism and higher storage rates. Those companies that have had to shut down have opened the door for consolidation.

In the end, there’s been a lot of learning, sharing and encouragement across the region for sound industry standards. While we continue to work with the fire and building departments among others, including government and enforcement agencies, the core of what we need is a safe and sustainable storage industry. Knowing what we now know, the business needs to move forward and continue its progress toward best practices.

We never want what happened in Hong Kong to happen anywhere else, so we need to proactively prepare and increase awareness, especially among government bodies. It’s imperative for self-storage professionals in each country to find an appropriate definition for the product and shape standards according to local fire and building codes. This will ensure peace of mind for investors and lead to years of uninterrupted growth.

The SSAA has been engaged with members to build codes of conduct, policies and procedures. In our member meetings throughout the region, this has been met with 100 percent agreement.

Bright Days Ahead

In light of what industry stakeholders have learned in Asia, they know the path they need to take: safe and sustainable growth. Knowing the industry isn’t all rainbows and sunshine may give investors pause. However, if it eradicates those who wish to proceed in a manner that’s detrimental to the health of the business, we’ll have done our job for the betterment and continued growth of the ever-bright self-storage industry in Asia.

Luigi La Tona is executive director of the Self Storage Association Asia, which is dedicated to assisting self-storage operators and industry suppliers working in emerging markets along the Pacific Rim. For more information, visit www.selfstorageasia.org.

Strategic Storage Growth Trust Inc. (SSGT), a public, non-traded, self-storage real estate investment trust (REIT) sponsored by SmartStop Asset Management LLC, has released its financial statement for the quarter that ended Sept. 30. In general, the company showed gains in revenue, net operating income (NOI) and occupancy.

SSGT increased same-store revenue by 14.7 percent, with NOI growing 19.3 percent, compared to the same period in 2016. Same-store occupancy was 94.9 percent as of Sept. 30, up from 91.3 percent the previous year. The REIT also reported growth in same-store annualized rent per occupied square foot, showing an increase of 11 percent ($12.69) year over year. Modified funds from operations grew approximately $1 million from a $100,000 loss during the same period last year.

Total revenue was $1.4 million during the quarter, a 56 percent increase compared to 2016, though the company reported a net loss of nearly $1.8 million for the period.

During the quarter, SSGT closed on two self-storage acquisitions—one in in Mount Pleasant, S.C., and the other in Nantucket, Mass.—for approximately $43.2 million. Combined, the assets comprise 141,000 net rentable square feet in about 1,340 units.

“Our same-store growth in revenue and NOI was largely driven by an increase in occupancy and rental rates over the past 12 months, while the portfolio grew with the acquisition of an existing operating property in Nantucket and a lease-up property in Mount Pleasant,” said H. Michael Schwartz, CEO. “The combination of same-store results and strategic acquisitions exemplifies the portfolio’s growth-oriented objectives.”

SSGT focuses on the acquisition, development, redevelopment and lease-up of self-storage properties. Its portfolio consists of 21 storage facilities in 10 states comprising approximately 1.6 million net rentable square feet in 13,700 storage units.

The REIT is sponsored by SmartStop Asset Management, a diversified real estate company with a managed portfolio of 108 self-storage facilities in Canada and the United States. Its managed properties comprise approximately 7.9 million rentable square feet.

Rent A Space, an England-based self-storage operator that specializes in leasing flexible workspace and office space, is investing £250,000 to add 25,000 square feet of rentable space to its facility in Netherton, England. The mezzanine addition will bring the property’s square footage to 75,000 square feet, according to a source.

Business partners Andrew Donaldson and Kevin Murphy believe the expansion will draw a variety of new tenants and help spur employment opportunities in the area. At its current size, the facility has played a role in generating 100 jobs since opening two years ago, a source reported.

Prior to launching Rent A Space, Donaldson and Murphy were directors with Big Storage Ltd., which built a portfolio of five self-storage facilities before selling to competitor Big Yellow Group PLC in January 2015.

“With 17 years of experience in the self-storage sector, I had firsthand experience of where the market trends were heading, and I feel that being Rent A Space rather than ‘X Storage,’ we can capitalize on the growing demand for flexible workspace while also offering a modern version of our core business—self-storage," Murphy told a source.

Founded in September 2015, Rent A Space operates self-storage facilities in Netherton and Shrewsbury, England. The company plans to open a third location in Northwest England next year.

Updated 11/21/17 – The city of Sheboygan is seeing even more self-storage activity this year with the opening of a new Transpo Mini Storage facility at 1331 Wisconsin Ave. The company is opening its new location, which was converted from a former North Woods Chemical Co. building, on Dec. 1. The building currently offers 76 interior storage units, with another 34 under construction. Property features include climate control, access-controlled entry and perimeter fencing.

Transpo operates four other facilities in Sheboygan.

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11/16/17 – Champion Storage & Rental LLC, which operates 10 self-storage facilities in Wisconsin, has opened the first phase of a new 20-acre property in Sheboygan, Wis. Two of the four buildings under construction at W1750 Playbird Road are now complete, according to the source.

“This is the most units we have ever built at one time, and [it] has been a very exciting process for us,” said Diane Fletcher, who owns the company with her husband, Jerry.

A third building that will contain large units designed for RV storage will be complete in early December. The final building, expected to open next year, will include an office and climate-controlled storage.

“We are happy to fulfill a great need in the area by building multiple buildings simultaneously with a wide variety of sizes, which was the whole reason behind purchasing this property. We are really looking forward to growing along with our community,” said Jerry Fletcher.

Established in 1997, Champion Storage is a family-owned company that began with one location containing a single storage building with 42 units. The business now operates eight facilities in Sheboygan, and one each in Oostburg and Sheboygan Falls, Wis. The sites offer climate-controlled units, vehicle parking, warehouse and office space, and trailer and container rentals.

Cindy Ashby, the former vice president of operations for Prime Storage Group, which owns 175 self-storage facilities in more than 20 states, has launched a new consulting firm. Dynamic Self Storage Solutions is designed to fill the growing demand for high-level expertise in the expanding storage industry, according to a press release.

The company’s services include facility auditing, market and operational analysis, due diligence, revenue management, staffing, training, and start-up packages for new owners. It’ll offer a wide range of strategies using the newest technologies, the release stated.

“Dynamic SS Solutions has a large arsenal of creative and practical assets to help take any self-storage entity to the next level of progressive success,” Ashby said. “We can provide expert consulting or dive in with turnkey operational solutions.”

Ashby has 25 years of experience in self-storage, including asset-management roles at two real estate investment trusts and four property-management companies. She also directed operations of a 200-seat call center and has had operational oversight of more than 6 million square feet of self-storage. Ashby has written operational guidelines and developed training programs for numerous companies, and serves on the executive board of the North Carolina Self Storage Association.

Based in Saratoga Springs, N.Y., and founded in 2000, Prime Storage Group ranked No. 9 on the 2017 Inside Self-Storage Top-Operators List. The company is owned by Robert Moser.  

 

VLC Enterprises LLC has purchased 4.15 acres in Phoenix to develop a $7.5 million Assured Self Storage facility. The property on the southwest corner of 48th Street and Baseline Road is in the Pointe South Mountain Business Park. Once complete, it’ll comprise 100,000 square feet of climate-controlled and drive-up storage, as well as some covered vehicle storage. 

VLC was represented in the land acquisition by Norman Herd, principal of commercial real estate firm Quantum Property Advisors. The seller was represented by CBRE Group Inc., a commercial real estate services and investment firm.

“The acquisition of this parcel was very complex and time-consuming. It entailed working with multiple property owners, mixed-zoning categories and required approvals from a strong neighborhood association that originally opposed the project,” Herd said. “The process took over two years to complete and required many negotiations to satisfy all the parties involved.”

Assured Self Storage was founded in Southern California in 1976 by Don Valk, who has constructed, owned and operated more than 70 storage facilities in Arizona, California and Texas. His company currently owns eight facilities in Texas and one in Arizona, and has a second project under development in Peoria, Ariz., at 85th and Northern Avenues, which is expected to open this year, according to its website.

Based in Phoenix, Quantum offers services including brokerage, financial analysis and underwriting, and market-related consulting. Over the past three years, its principals have completed more than $75 million in real estate transactions. It has a satellite office in Seattle.

Greg Standridge, an Arkansas state senator and self-storage owner, died Nov. 16 after a battle with cancer. Standridge was a Russellville, Ark., native who owned Access Mini Storage and co-owned Coffman Standridge Inc. insurance agency in his hometown. He was 50.

The Republican had served in the senate since 2015, when he filled the seat vacated by Michael Lamoureux, who resigned to become Gov. Asa Hutchinson’s chief of staff and transition director, according to the source. Standridge won the seat in a special election.

“I am saddened by the passing of Sen. Greg Standridge—a friend and dedicated public servant,” Hutchinson said in a released statement. “I recently visited with Greg in his home, and even with his illness, he was a source of encouragement and strength. Greg served his community with distinction, and he loved his family most of all. Greg’s passing is a great loss for our state, and he will be missed.”

On the morning of Standridge’s death, a subcommittee of the state highway commission observed a moment of silence in his honor. Several civic and state leaders also issued public statements of support including Lt. Gov. Tim Griffin and Sec. of State Mark Martin.

“Our hearts are broken to hear of the passing of Greg Standridge. This is a great loss to both the city of Russellville and our state,” said U.S. Rep. Steve Womack.

In addition to his business interests and serving in the state legislature, Standridge was a volunteer firefighter and a member of the Pope County, Ark., Emergency Medical Services Squad. He was a member of the Russellville Lions Club and the Russellville & London Masonic Lodge. He attended Arkansas Tech University.

Standridge is survived by his wife, Karen, and four children.