Self-storage has proved to be a recession-resilient (but not recession-proof) property type considering its performance over the past five years. The most recent recession marks the first time this sector realized a pronounced decrease in operating performance. Although the recession caused performance to stumble, it generated a new demand from homeowners downsizing or losing their homes during the foreclosure crisis. During 2013, the self-storage industry has realized significant growth which has captured the attention of the nation’s investors. The Self Storage Industry exhibited materially positive absorption over the course of the year. This absorption has allowed the industry to decrease the amount of promotional discounts and concessions, further enhancing revenue potential within the sector. Occupancy increases will likely become less pronounced in the coming year and are expected to stabilize somewhat as rental rates continue to be pushed by operators. Revenue growth far outpaced occupancy growth for the industry. The amount of revenue growth should be attributed not only to occupancy growth, but also to operator’s success in increasing rental rates for existing customers and reducing discounts to attract new customers. As the industry’s track record of positive revenue growth extends, more capital has continued to flow into the asset class, making stabilized assets very attractive to investors.
Net operating incomes for the industry grew at a faster rate than revenue, indicating that operators were successful in driving top-line revenue growth while cutting expenses. A large amount of expense cuts came in the form of existing Yellow Page advertising and transitioning to online marketing. It is likely that expenses have been reduced to a point of stabilization. Expenses may actually start to increase in the coming years due to increases in property taxes stemming from higher accessed values. However, revenue increases will outpace any expense increases. Little for sale inventory over the past two years has pressured capitalization rates downward, to near record low levels. Coupled with income growth and lower overall rates, self-storage values are increasing and there is little reason to expect that the self-storage industry will reverse its recent positive momentum in 2014. We have Hedge Fund Buyers, Private Investors, REIT’s and Traditional Self Storage Buyers interested in acquiring additional self-storage space. Many of our Buyers are “All Cash Buyers”.