During the recent SSA Fall Conference and Trade Show, we had the opportunity to engage with industry experts, gaining insights into the current self-storage landscape. Eric Blum of BMSGRP discusses the impact of the Extra Space, Life Storage acquisition, and high rates on the self-storage industry. Suggesting that despite market fluctuations, he sees continued interest from those entering the industry and predicts cycles of rate changes. With demand for self-storage remaining strong, driven by evolving needs.
James: Eric, it's so nice to speak with you at the trade show. Thank you for coming out here and we're happy to be tabling next to you. Just a little bit to pick your brain is what are you seeing in the industry sort of as a fallout of the extra space, life storage, acquisition, and the rates being so high? Are you seeing people trying to get back in the industry and get back into development? What are you seeing?
Eric: Thanks, James. So, basically, what I've been seeing on the ground going from market to market is people still want to be in the industry. Rates have kind of taken a hit in certain markets where we've seen a lot of new sites come online. We're seeing rates drop, but then to fill up locations, to gain that occupancy, and then they're going to raise rates down the line, whatever that might look like, six months, nine months, to get back to that higher rate. Asking rates where sites are full, markets are strong. You're still seeing strong high rates. People coming into the industry, there's still room for growth in it. It's all about timing. So right now, it may not look wonderful with high interest rates and lower rates in certain areas, but I've been out and I've seen areas that are still strong rates, strong growth, and people want to be there. They understand that it's going to take them about two years to open their doors. You're going to see that. In that two years, you're going to see rates from the other REITs come back up as they take over, implement their institutions, their policies, and more than likely, you're going to see them. They have to perform to Wall Street, so Wall Street wants to see them doing well. So they'll bring those rates back up. It's just right now, it's an interesting time. Going into when someone coming into the industry, going back to that, again, two, three years from opening your doors, hopefully, they'll be on the back end of that cycle and we can continue the growth in the industry.
James: That makes a lot of sense to me. Thank you for those insights. We definitely have seen demand for self-storage even out from the COVID highs, that huge outlier in those two years. But do you think demand for self-storage is staying strong? People are speculating that because rates are so high, there's less people moving. Why would they give up on a mortgage at a low rate if rates are so high? What are your thoughts on demand for self-storage right now?
Eric: Again, market specific. People still need storage. You still have college kids. You still have mothers, elderly people moving in with their family. You are seeing a change from when people were using their other bedrooms for classrooms, offices, people going back to work. People that didn't move at those times, people that didn't come from the South, move from the North to the South that stayed, they're going back to work, reusing those rooms, getting their stuff out of storage. But again, everything's cyclical. Election year, next year, I'm sure we'll see rates start to drop. People start moving again. So 20 years, storage, I've been in the industry. I've seen all the lows, all the highs, nothing like I saw during COVID. But it's a cycle. So people will eventually start moving again. Rates will drop in terms of interest rates. Income costs are probably here to stay. But you'll start seeing those changes probably, I would hope, in the next year or two. Demand stays high. People need storage.
James: That's true. No, absolutely. Americans do love their things. Thank you, Eric. Thank you for giving some altitude to the situation and hearing your insights. Thank you so much.