The Self Storage Industry REITs numbers are coming in very strong. As of April 28, 2014 the group has shown an 18.04% improvement in share price since the start of the year!
Reasons for Strong Numbers – Self Storage
1. Lack of New Facilities to Compete – Good news – Bad news about the 2008 – 2012 Recession. The lack of capital and more stringent lending regulations for new development of commercial real estate projects in the United States that started in 2008 created a significant slow down on new properties to compete with existing facilities (it is still difficult to get financing for new development).
With the turn around in the economy, self storage facilities have increased their occupancies over the past year, allowing them to increase their rents. As this trend continues, the self storage industry should continue to prosper.
2. Low Interest Rates – It should be noted that the values of self storage facilities have substantially increased over the past few years due to the fact that interest rates remain low. As long as interest rates remain low, self storage values and profits should remain very strong.
3. Easy For REITs to buy Existing Facilities – Although new development may be limited by tight financial markets and uncooperative local city governments, the Self Storage REITs do have a unique ability to acquire existing facilities and grow their asset base.
a. High Sale Prices – The self storage industry is has highly fragmented ownership, with over 80% of it dominated by “mom and pop” operators, some of which are poised to sell their properties. Self storage facilities are selling for “all time high prices” due to the low cost of capital.
b. Challenges With Internet Marketing – The fact is the for many self storage facilities, over 50% of their new business is derived from advertising from the internet. Many “mom and pop” operators are having difficulties in properly getting their facilities marketed correctly on the internet. This is not a problem for the “well financed” Self Storage REIT companies. As the Self Storage REITs continue to improved their internet marketing presence, this hurts the smaller operators financial positions which can create opportunities for larger companies to buy them.
Self Storage REITs Should have a strong Spring and Summer
Historically, the spring and summer months are the busiest times of year for self storage rentals. The result of this fact is that Self Storage REIT companies are in a perfect position to improve their financial numbers.
Are you in the market to rent a self storage unit in South Orange County? San Clemente Self Storage is the market leader of self storage in the City of San Clemente and offers affordable, clean, and secure storage unit rentals. Give San Clemente Self Storage a call today at 949-366-1133.