Category Archives: Public Storage

How Big Can Self-Storage Get?

 Issue 88 – Largest Public Storage Debut

Introduction...The largest Public Storage property makes its debut in Jersey City, N.J.  The facility is located in the Powerhouse Arts District’s renovated 100-year old, block-long building.

The debut... Public Storage hosted its grand opening this last spring and now offers a total of 3,978 units.

Conclusion….With enough population density, there doesn’t seem to be a limit on how big storage properties can get.

Do The REITs Control The Self-Storage Market?

 Issue 81 –  Public Storage opened this 12-story facility in the Bronx, NY in 2013.

Introduction...If you live in an urban area, you’ve probably noticed the 200,000 square foot to 300,000 square foot gigantic storage properties being built by one of the self-storage Real Estate Investment Trusts (REITs). You might even believe the REITs are taking over the self-storage market.

The market…Actually, the REITs account for just 13% of the 41,879 storage properties in the U.S. according to the 2017 Self-Storage Almanac.  The remaining top 100 owners account for another 11%.  This means 76% of the storage properties are held by smaller owners with the vast majority, mom & pops, owning only one.

What prevents the REITs from taking over the market?  The REITs business model based on their capitalization and high overhead costs mean they look for properties that are at least 80,000 square feet in urbanized area with a minimum population of 50,000.  The U.S. Census Bureau reports show that there are fewer than 500 of these markets in the U.S.  Many of these markets don’t have enough density to support the larger properties required to be economical.

However, there are 18,571 towns and villages with populations under 50,000 according to 2015 statista.com   These markets are not suitable for the REITs, but the smaller operators with lower overhead thrive there.

In summary…These smaller secondary and tertiary population centers are where we target to both buy and build self-storage properties.  You might think that these markets are not profitable enough to meet our investment goals.  Not so!  Our goal is to accumulate at least 20 of these properties that could later be sold in bulk to a highly capitalized buyer.  One such owner I know did just that.

Another group that specialized in buying and building self-storage in these secondary and tertiary markets recently sold out for $200,000,000.  That should be enough.

If you are intrigued by this model, drop me a note at bill@billmoist.net for more details.

How Self-Storage Construction Can Improve Your Cash Flow

 Issue 77 – Cube Smart, Arlington, VA

Introduction…Tuesday Texas Self-Storage Association met in Dallas for their annual “Trends in Self-Storage Construction” update panel.  What we learned can increase your cash flow.

Major trends…The major shift is the increased size properties the REITs and other public entities are building today.  Three or four years ago, a 100,000 square foot storage facility was considered large.  Now, 200,000 to 300,000 square foot storage facilities are being built by many operators.

To watch the video, click here now.

This means more 4, 5 or taller storage facilities are being built in high-density areas of the city.  How this can improve your cash flow follows a little later.

The largest cause of cost escalations…This surprised me and it may surprise you.  The largest single cause of cost increases for self-storage in urban areas is architectural control. Instead of putting up an all steel building as in the past, now cities are requiring brick, stucco, and/or expensive exterior materials.

Some cities require these higher cost exteriors on that which can be seen from the street.  But, others require it for all the buildings plus articulation on the front facing area.

Increase in insulation and number of bathrooms also have been added by some. As well as structural fire suppression systems.   But, these items are much less expensive than the architectural control items above.

What about green initiatives in self-storage construction?  Generally, the primary driving factor in building storage properties is keeping the construction costs as low as possible.  In many areas of the country, the cost of going green outweighs the savings.  However, one developer who builds in the Texas Rio Grand area builds solar and wind energy in all their new projects.

However, in North Texas solar and wind are not economical, so he doesn’t use it here.

How to increase your cash flow?  This message was expressed by several of the panel participants.  The advice was to stay out of the urban areas where the REITs are building or are likely to build.  During lease up, which could take several years, they will cut rents by 50%.  Then later, manage rental rate increases.  That is similar to the retail category killers that put many mom and pops retail out of business.  Be on guard.

In conclusion…So where should be build and buy storage properties today?  Stay out of the 50 major urban centers.  Focus on the tertiary markets as we have done and are doing today.  This little tip could make you or save you tens or hundreds of thousands of dollars.

To learn how you can get passive residual income from self-storage, “Get 9 Little Known Secrets For Steady Real Estate Income – FREE”  at self-storageinsider.com.

To watch the video, click here now.

Benefits Of Buying Self-Storage Now

 Issue 73 – Buying Self Storage Now

Introduction...Self-storage publicly real estate investment trusts (REITs) have been the best performing public asset class over the last 22 years. Investors have poured billions of dollars of new investment capital into storage REITs. The result has been a building and buying spree pushing storage property prices to historical levels.  That has changes and now you can benefit.

What’s the change? Property purchases are down by an annualized 70 percent for the top five self-storage REITs.  That compares to a high of $5 billion in purchases last year according to a second-quarter report by MJ Partners, a Chicago-based real estate brokerage and investment banking company.

The major acquisition drop-off is attributed to the surge of newly built self-storage facilities coming online across the company.

The buying spree of existing properties by the REITs have pushed up acquisition prices on all classes of properties.  While we don’t compete with them directly, their buying has given our sellers unrealistic pricing expectations.

The benefits of buying self-storage now

  • Now that the REITs have scaled back their acquisitions, the private equity companies will be the primary buyers, that’s us
  • The pull back of the flood of money from the REITs should dampen pricing of acquisitions
  • Some of the exuberance will go out of the market and we will go to more sustainable pricing
  • Many of our potential sellers will realize that their pricing expectations have been too high

In conclusion…We have been watching some nice self-storage properties that have been for sale over a year now.  it is our belief that many of these properties will be re-priced at levels that are more profitable to the buyers.  The near term opportunities will be exciting.  Be sure to stay tuned.  If you are not a subscriber to this newsletter, do so in the upper right of this page or go to self-storageinsider.com.

Source: Alexander Harris, “U.S. self-storage industry statistics,” SquareFoot Storage Beat, 15 August 2017

Record Breaking Self-Storage Sale…In Menomonee & Waukesha???

Introduction…Unless you are from the upper Midwest you’ve probably never heard of Menomonee (pop. 35,974) or Waukesha (pop. 71,489.)

Click here to watch the video “Record Breaking Sale…”

But, some well-funded self-storage buyer did.  He paid $17,100,000 for The Vault of Menomonee Falls and The Vault of Waukesha.  This is the highest amount ever paid for a self-storage portfolio in the Greater Milwaukee area as announced by Marcus & Millichap.

This sale…This sale works out to be gigantic $16,553 per unit or $164 per square foot for the existing rentable space. The Menomonee property has another 317 units to be completed in mid-2018 which was factored in the purchase price and is yet to be leased.

In contrast, DFW has a population of 7,300,000 and is expected to add another 125,000 people in the next year.

So, DFW’s one year population growth is expected to exceed the total population of Menomonee and Waukesha.

The high price to purchase existing self-storage properties in Menomonee and Waukesha gives contrast to what we’ve been able to secure in the DFW area.  We’re buying 98% leased self-storage in Dallas for $36 per square foot.

Conclusion…Does our property seem like a bargain purchase to you?

 

The Renaissance of A 6,000-Year-Old Industry

Ancient Chinese Pottery

Introduction...The first self-storage facilities were probably in China. About 6,000 years ago, the Chinese would often store their possessions in clay pots in public underground storage pits. These pits were monitored, to make sure that nobody could remove any pot or its contents except for their own.

Thousands of years later, the British had refined the concept, for the sake of dignitaries who had to be away from home for extended periods, by crating these items and placing them in stables – often with watchmen to secure them. These arrangements for storage were made by bankers, who procured such storage through third parties.

In the 1850s, the storage business came to America with the creation of Bekins, which was founded by Martin Bekins, son of a Dutch immigrant. Bekins recognized the new migration of Americans to the west, and was the first to build a facility for the storage of household goods and valuables.

In modern times…1906, Bekins built the first reinforced steel and concrete warehouse in Los Angeles, and the second in San Francisco. It is interesting to note that during the great earthquake of 1906 in San Francisco, this warehouse was one of the few structures that did not collapse.

On the east coast, more storage was being constructed by such companies as Minneapolis Van Lines and Weimer Storage. Indeed, the 1920s saw a large number of companies enter the self-storage industry. In 1928, Arthur Trachte, of Trachte Building Systems, built interconnected metal garages for “cars without homes”.

The modern self storage industry began in roughly the 1960s. But the large- scale, institutional side of the business began in 1972, with the first Public Storage facility in El Cajon, California.

Today, there are around 52,000 self-storage facilities in the U.S. The total area of this storage is three times the size of Manhattan – under roof! The industry generates over $5,200,000,000 in revenue each year. One in every ten families in the U.S. rents a self-storage space.

In Conclusions…The Renaissance of A 6,000-Year-Old Industry is taking place in America today and you can be a part of it.  There are 52,000 facilities in the U.S.  But experts in industry are saying that the earliest the U.S. demand will be satisfied is 2025.  There still is room for you to participate.

Continued Next Week…Get ten little known secrets this industry produces  steady real estate income.  Click here to make sure you can be a part of this Renaissance.

How A Dull & Boring Segment May Be The Best Way To Invest In Real Estate

Introduction…As commercial property go, self-storage has none of the sex appeal of a gleaming office building or a ritzy shopping mall. There are more than 50,000 self-storage facilities in the U.S. — nondescript warehouses filled with cubicles where Americans keep the belongings that don’t fit into their homes.

But even though self-storage is about as unassuming an industry as you can get, it turns out to be a pretty solid investment — often better than other kinds of real estate.

Why is self-storage so popular with investors?

  • Recession-resistant
  • Lowest default rate among commercial real estate
  • Low operating expenses
  • Easy tenant lock-out for non-payment
  • Make ready is a broom
  • Trade area is 3 miles so easy to analyze and monitor
  • My favorite – no toilets

Self-storage properties can be bought in all sizes and prices.

On the low end,  it is a classic mom-and-pop operation, owing to the low level of upkeep and capital spending required.

On the high end, one 724 unit, 70,000 square foot class A self-storage property recently sold for and estimated $18 million.

A local investor could find a smaller property to purchase, invest in a larger private offering, or even a Real Estate Investment Trust (REIT) if one likes public offerings.

Click here to watch “How A Dull & Boring Segment May Be The Best Way to Invest in Real Estate.”

In summary…Very successful investors have watched Forbes 400, B. Wayne Hughes, build his $2.4 billion fortune on self-storage.  Mr. Hughes founded Public Storage in 1972 which is now the largest self-storage REIT with 2,200 locations in U.S. and Europe, totaling 142 million square feet of rentable space.