The first few weeks of 2021 have confirmed that investor sentiment towards self-storage is at an all-time high. Today, stabilized assets are commanding record high pricing while newly developed lease-up properties and C of O deals are regaining momentum and pricing power, reinforcing that once again, self-storage will emerge from a market disruption as the shining star of commercial real estate. This is largely being driven by the current debt markets and the investment community’s strong desire for yield and assets with low capital expenditures, such as self-storage.
Over the last few weeks, top executives from around the self-storage industry gathered virtually to discuss industry trends, investor sentiment and the overall market outlook for 2021. The consensus is that the industry is experiencing some new demand drivers due to the change in live/work/school environments, the slow down in new developments, longer tenancy and a stickier tenant base. All of these factors are leading to all-time high occupancy, further fueling investor appetite for self-storage properties. However, despite the positive changes in market fundamentals, most remain cautiously optimistic about the industry’s long-term outlook heading into 2021.
Meanwhile, the phone at Argus has been ringing off the hook with owners, developers and buyers wanting to find out what their property is worth and what opportunities we are finding in today’s market. This is truly one of the busiest Januarys we have experienced in our 27-year history. In some cases, their interest is only curiosity, but in many cases, they are interested in valuation for financing, tax planning, newly developed properties (still leasing up) or selling. As we have for the past 27 years, and as part of our advisory services to our clients, Argus is now offering a free 2020 sales comp report for each of your markets in an effort to keep our clients educated about recent transactions and industry trends. Argus has tracked and inventoried more than 1,000 self-storage sales transactions for 2020 and we were involved in more than 100 transactions nationwide in 2020, which puts us in a unique position to advise our clients. If you would like to receive this free report, please contact your local Argus Advisor.
The tide is clearly high for self-storage valuations today. The overall operational performance seems to be firming up and the short-term outlook is bright. Many believe we will continue to see valuation increase as operating performance will likely improve throughout 2021. Revenue and net operating income for the self-storage REITs is expected to start ticking upward in 2021 and 2022. After several quarters of underperformance within the broader REIT industry, self-storage will once again be on top. It has been well-documented that the self-storage industry has outperformed during the pandemic and the improving market fundamentals will continue to position the industry as a core sector.
The value of your self-storage investment goes up and down as the market sentiment and debt markets change. In order to truly realize what the value of your investment is and what it has been, you must at some point sell the investment. You can’t spend net worth! Obviously, the investment horizon of each ownership group is different and will vary depending on their individual objectives. However, in order to maximize your value, you should always be evaluating the current market, the risks, the opportunities, and how those dynamic factors impact the value of your property. This will allow you to make the best decision and position your investment appropriately. If you are at or near a personal crossroads, it is time to get serious about maximizing your investment’s value. Take the time to talk with your local Argus Advisor, request the free 2020 sales comps report for your market, and analyze the information to make an informed investment decision. Carpe Diem!
Ben Vestal, CEO of Argus Self Storage Advisors, can be reached at 800-557-8673 or email@example.com.