The top 50 U.S. metropolitan markets need approximately $25 billion in new self-storage development to meet population growth and expected consumer demand during the next five years, according to Dean Jernigan, chairman and CEO of Jernigan Capital Inc., a merchant bank and advisory firm. Jernigan estimated 3,450 new storage facilities are needed to erase a deficit caused by a lack of construction coming out of the recession and keep pace with expected population figures, according to the source.
Of those 3,450 facilities, 1,575 are needed to fill the development deficit and 1,875 to meet future demand, Jernigan said. Between 2010 and 2014, a total of 300 new self-storage facilities were built in the top 50 U.S. markets, when 1,875 would have been the ideal number to keep pace with population growth, he told the source.
As a result, the industry is “seeing tremendous occupancy, rent growth and terrific top-line revenue growth from the public companies,” Jernigan said. “We can’t possibly ramp up quickly enough as a sector to build enough storage to make up for what should have been built.”
In its latest Self-Storage Market Conditions Report released in March, commercial real estate firm Cushman & Wakefield identified 18 of the top 50 U.S. metropolitan statistical areas (MSAs) as being undersupplied for self-storage, while 14 markets were oversupplied based on 2014 data. Just 14 MSAs were considered to be at development equilibrium.
Jernigan envisions a development-growth cycle that could last up to seven years. Currently, Jernigan Capital expects to close on nine loans worth $48.8 million by the end of June, according to a recent filing with the Securities and Exchange Commission. Six of those loans are earmarked for development. The company also has nine signed term sheets worth $81.3 million in development loans and another 11 outstanding term sheets worth nearly $98 million in development financing, according to the filing. “We have loans in the closing queue in 10 different states,” he told the source.
Jernigan, the former CEO of self-storage real estate investment trust CubeSmart, founded Jernigan Capital in January 2014. He has more than 30 years of industry experience, having founded Storage USA Inc. in 1984. In 2006, he became CEO of U-Store-It Trust Inc., which changed its branding to CubeSmart in fall 2011. He officially retired from the REIT on Dec. 31, 2013.
Headquartered in Miami, Jernigan Capital provides loans in markets across the United States. Its senior staff has participated in more than $6 billion of self-storage transactions over the past 30 years.
Sources:
- Jernigan Capital: Form 8-K
- The SpareFoot Storage Beat: Jernigan: Metros Need $25B Worth of Storage Facilities
