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20 Nov 2023

Interview with Marcus & Millichap


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. James speaks with Kevin Bledsoe and Jared Houck of Marcus & Millichap, who share insights on the current state of the acquisitions market. They note that the gap between buyer and seller expectations has narrowed, especially with the Federal Reserve slowing down rate hikes. Sellers are becoming more realistic, realizing their facility's value might not be as high as it was a year ago. The acquisition landscape is affected by significant industry changes like the merger of Extra Space and Life Storage. While it might not impact secondary or tertiary markets significantly, there's pressure in primary markets, especially among larger portfolio owners, to make deals amid changes in the industry.


James: Kevin, Jared, thank you guys for stopping by and agreeing to chat with us. You know, it's always so important to get boots on the ground intel from what you guys are seeing in the acquisitions market. You know, we've been hearing whispers that, you know, with the rates and everything like that, sellers are starting to budge and have more realistic expectations and moving acquisitions volume along. But what are you guys seeing?

Kevin: Yeah, we're seeing, you know, maybe, you know, 12 months ago, that gap was pretty drastic between where buyers were coming in and also where sellers expectations were, right? So interest rates, you know, went up so fast that we just couldn't, we just weren't able to close the gap. You know, so we may have been 30% apart between buy and sell. Now we've been able to close that gap, the Fed has slowed down a little bit on rate hikes. So we're still, there is still a significant gap, but it's really much closer to maybe 15 to 20% from what it used to be a year ago.

Jared: Yeah, I mean, to add on to everything that he said, it was pretty much spot on. You know, I think one of the biggest things that, you know, a lot of, you know, sellers are finally realizing is that, you know, a year ago or so, like their facility, you know, was worth like $300,000, $400,000 more than what it is now. And, you know, they're just kind of, you know, going, you know, I have to move now like this, things could get worse. So, you know, that's one of the things that we're seeing as well.

James: Absolutely. One thing I think a lot of people are curious about is with this big acquisition of extra space, you know, sort of merging with life storage. Has that ended, What we're seeing is the asking rates, the average price per square foot has really dropped year over year, you know, compared to the all-time highs of 2021, 2022. Has this added some sort of pressure to sellers to get rid of their facilities or to sort of, you know, get those sold as asking rates have really dropped a lot? Has that translated to the markets you guys are seeing?

Kevin: Well, I think secondary, tertiary market owners, I don't think it translates too much at all, right? It's just, they're not really paying attention to it. It's a big news headline. It's a significant change in our industry, for sure. When you start getting into, you know, more primary markets, you know, top 50 MSAs, yeah, it's definitely newsworthy, right? And some of these portfolio owners are looking at this and you're starting to see this pressure of, hey, maybe a CubeSmart is going to come in or an extra space or public storage is going to come in. Maybe you write an offer and start taking down some of these bigger portfolios. I think there is some pressure there to try and get some deals done.

James: Gotcha. No, I mean, thank you guys so much for stopping by. This is such important information to get from you guys since you're on the front lines every day, you know, working with sellers, working with buyers to get these acquisitions done. So thank you so much for your time.

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