February 2018 Newsletter
2018 Self Storage State Of The Union
New Construction is the Story of 2017 & 2018!
Self-storage records were broken in 2017 and looks like even more will be broken in 2018. 52 Million square feet of new self-storage may sound like a lot, but unless you are in one of the top 10 metropolitan cities it will have little effect or even a positive effect on your Storage Authority Facility. 40% of these new facilities were built in just 5 cities. And take one of those cities, Miami for example, they still need new construction to meet the demand. But the immediate concern is when you build 2 – 200,000 sf facilities on the same side of town it is going to increase the rent up time from 24 months to 48 months. The 1000 new facilities equate to a 2-3% increase in the number of facilities but if you look at the average over the last 10 years it is well under 1% growth leaving unmet demand in many locations throughout the US.
In 2017 many operators exceeded their 12 – 14 month projected rent up timetables. And vacancies remain at or near historic lows with increased rental rates.
Whether you like or hate Trump the good news is the new tax codes provides immediate tax savings for savvy self-storage owners. Now if you do component depreciation the previous 5yr – 7 yr and 15 yr component depreciation items can be depreciated in the first year!
So what does this all mean? For the REITs and large developers who want to add 5 or 10 or more facilities to their portfolio, it means it will not be easy or cheap in 2018. The self-storage facility inventory for sale continues to be very low and continues to be priced high. The large players like to be in metropolitan areas where they can have multiple large facilities and these are the areas where the bulk of new facilities were built in 2016, 2017 and will be built in 2018 and 2019.
For the individual investor and Storage Authority Franchisee all the new construction and associated abundant news is good news in many respects as it is bringing in new technology and new renters using for the next generation self-storage facility. As long as you are looking to build a single facility outside of the major metropolitan areas, you have the opportunity and luxury to take your time and typically find a location where there are no new facilities in your 3-mile radius.
The new growth has spurred a lot of self-storage technology growth that will make your facility more renter friendly. This allows you to rent for more and allows you do more with fewer employees. As the new self-storage quality and security standards are increasing so are the number of people who want to rent at a new generation facility vs an older facility.
Also, the new technology allows us to do a mini demand review in 15 minutes which only a year ago would take two days. Check out https://www.unionrealtime.com/radius.html it will cut your research time by 90%. Let James know Marc from Storage Authority sent you.
Many self-storage will not Cater to the Modern Consumer!
The self-storage world is in the middle of going cloud-based and customer base. In a few short years, we have a two-tier self-storage world. Motel 6 vs the Hampton INN or a $1.99 coffee at Dunkin donuts vs the $4.99 coffee at Star Bucks. The world needs both but you have to decide which one you want to be a part of and the profits from. The High Tech – High Touch model may take a little more work but you will make substantially more profits
For most new developers it will take longer to develop a new self-storage from the ground up if you are not multi-tasking all the time. The Vendor capacity has not caught up with the new development demand so 60-day building designs are taking 120 days. Building delivery times for many manufacturers is 6 months.
Even bidding has gone form 30 days to 90 days. In some cases, the bidders have so much work they are not doing the proper work to keep the bids low but rather making a quick estimate and adding 20 or even 30% to the price. Or they bid the plans your provide which often means they are bidding 75% of the job leaving 25% as extras. In the past, they would have contacted you to make the bids complete.
Tips You Can Use Today:
- Even with great demographics and self-storage demand, a new large nearby competitor can double you rent up times.
- In 2018 it is going to be much easier to find good locations for single story facilities than multi-story facilities without
- If you are looking for land the new internet-based tools that provide the existing self storage rates, locations, square footage, climate control sf vs non climate control square feet, populations, mile radius maps and the existing self storage square footage per person on a single page will turn two days or research into 15 minute review so you can quickly look at more sites. See Radius for more details on internet research.
As part of our Dynamic Ease Self Storage Development Series
, we help our franchisees around the development landmines, including finding land, designing, financing and building a premier self-storage facility and to understand the options and prepare accordingly.
If you want to learn more about Storage Authority Franchise there is a wealth of information on our website www.StorageAuhorityFranchise.com
Don’t forget to check out “Why Storage Authority
” and our blog/newsroom. Then the next step is to apply on our website or email or call Garrett Byrd (Garrett@StorageAuthority.com
or Direct 941-928-1354