21 Jan 2020
Story originally featured on Sparefoot.com
In the self storage business, 2020 could be the year of “Let’s make a deal” when it comes to newly built facilities.
In recent months, executives at several self storage REITs have signaled that some brand-new facilities could be up for grabs at potentially lower prices as their owners recognize that hoped-for financial projections are out of reach.
Now, industry observers are echoing the REITs’ forecasting. In 2020, experts say, owners of some new facilities might seek a quick exit in the face of oversupply woes and financial underperformance. This could lead to a small-scale feeding frenzy among prospective acquirers.
Ryan Clark, director of investment sales at Tampa, FL-based self storage brokerage firm SkyView Advisors, said the turnover of newly constructed facilities — at least those failing to meet their pro formas — that he’s seen in the second half of 2019 should extend into 2020. This will be especially prevalent among under-capitalized, new-to-the-industry developers, he said.
“Owners will begin to experience pressure from lenders and equity partners, which will increase sales and soften pricing for those types of assets,” Clark said.
From a broader perspective, Vestal said he expects the acquisition market in 2020 to be similar to the market in 2019, although he and others anticipate pricing will soften in overbuilt markets such as Houston, TX, and Miami, FL.
In light of the oversupply crunch, Rick Beal, co-founder of Atomic Storage Group, a self storage management and consulting firm based in Port St. Lucie, FL, said he welcomes efforts by city officials around the U.S. to curtail self-storage construction.
Story: John Egan Thumbnail: Photo by James Sullivan on Unsplash
