CURRENT SELF STORAGE MARKET
In 2014, we saw CAP rates dip to a level we have never seen mostly in the top 50 MSA’s. We continue to see them remain in these low levels today. Even our market prior to the “Great Recession,” where many properties were sold on a “proforma”, the cap rates and demand for our asset type was never at the level it is at today. Cheap and readily available debt has created a strong demand for storage properties especially, when investors can buy a storage property anywhere from 100 to 300 basis points higher than other commercial real estate classes. Theses higher returns and successful track record of our industry has shown during the recession, has prompted many real estate investors to “jump ship” and enter the self storage industry. Our industry has received much notoriety from the investment community and has become more well known as an attractive investment vehicle. The days of “mom & pop” self storage operations are slowly coming to an end as public and private REITS, regional owners and 1st time storage investors aggressively purchase existing facilities.
Storage has become a well-known “safe” and diversified investment vehicle which has further helped to push cap rates to these low levels. However, as interest rates begin to rise so will the cap rates. An investor today can get debt anywhere in the 4-%-4.5% range therefore can afford to buy a storage property at a 6% cap. Our rule of thumb is the cap must be anywhere between 100 and 200 basis points above the debt in order for the investor to make an acceptable return. An investor cannot make money paying 6% interest when buying a deal at a 6% cap. Although interest rates will rise, they will do so at a slow pace giving the market and cap rates time to adjust.
WHAT IS PERFORMANCE SELF STORAGE GROUP?
Performance Self Storage Group offers self storage brokerage, marketing and consulting services to self storage owners and investors nationwide with a specialization in California. With over 30+ years of self storage industry experience, PSSG’s dedication and focus exclusively in the self storage industry offers you, the self storage seller, investor and owner; storage specialists with an unmatched level of experience. With a commitment to deliver the results you expect, our team of self storage brokers, consultants and storage marketing specialists have built customized solutions that can facilitate your real estate, marketing and operational needs to help achieve your larger goals. Our true value stems from the years of relationships we have built among self storage owners, storage investors, vendors, managers and professionals in our storage industry over the last 30 years. Our experienced self storage brokerage sales team, storage marketing department and consulting division will help meet your business goals.