The Self Storage market continues to thrive with significant capital both debt and equity readily available. Rents have been increasing, cap rates have been compressing, sale prices per square foot have been increasing, new construction has been limited and vacancy rates have been declining. The only looming concern is interest rates. As interest rates tick up so do cap rates, decreasing the value. The only question is can rental rates and occupancy rates rise fast enough to offset the negative effect of rising interest rates.
Many investors are turning away from the traditional real estate sectors of industrial, multifamily, office and retail. For both the industrial and multifamily sectors the competition to buy has driven cap rates down to an unacceptable level for many investors. The office sector is less desirable because of the extensive tenant fit up required by the landlord when signing a new tenant. The retail sector is in a free fall as a result of Amazon and On-Line Shopping. This leaves the Self Storage Sector which is the youngest of all real estate niches, having only begun in 1960’s and 1970’s in any meaningful way.