The Real Deal Miami

Self-storage growth slows, but the pipeline still isn’t shrinking

Stocks of self-storage companies are trading at 2 percent discounts, still better than office and mall REITS
January 17, 2018 04:30PM

(Credit: Wikimedia Commons)

The steady and strong growth of self-storage is softening after years of success in the sector, market indicators show.

Self-storage has for years outperformed all other major commercial property types in terms of earnings growth and company stock performance, but self-storage companies are now actually trading at a 2 percent discount to the estimated market value of the properties they own, according to Green Street Advisors analyses cited by the Wall Street Journal.

That’s still much better than the discounts on office and mall real estate investment trusts, which are trading at 9 and 13 percent discounts, respectively. Industry leaders say the sector is just coming back down to earth, but isn’t shrinking.

“When you have five or six blowout years and you get back to normal, it just looks slow,” Life Storage CEO David Rodgers told the Journal.

Development nationwide is stronger than ever though. The annualized rate of new self-storage construction was $4.6 billion on a seasonally adjusted basis, or double that of November 2016 and triple that of November 2015, according to Census Bureau figures cited by the Journal.

South Florida has seen a steady stream of development and trading since the recession. Some developers have become creative with their facilities — in December, the city of Hialeah approved plans for a mixed-use project with 413 apartments, nearly 16,000-square-feet of retail, and an 80,000-square-foot self-storage facility on a 6-acre site.

Elected officials in New York have moved to curb the proliferation of self-storage facilities in industrial areas, which critics say displaces manufacturers that employ more New Yorkers. [WSJ]  – Dennis Lynch