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