Reflections on SSA Self-Storage Conference: From Invincibility to Stability

April 1, 2024

Reflections on SSA Self Storage Conference

As I was enjoying sunset dinner on the water during the recent Spring SSA Conference in National Harbor, I reflected that the sun has set on the Covid era commercial real estate market and dawn awaits us on the other sideThe go-go-go self-storage market of yesterday gave a spirt of invincibility with a buzz of high occupancy and aggressive street ratesNow, we are in a market finding a new stability with buyers maneuvering across the market in new ways to take aim at the assets that match their desired profile of growth, risk, and reward.   

What started 2024 as a burst of optimism for coming interest rate cuts and increased transactions, has given way to a hopeful yet patient optimism.  There remains a robust group of buyers who are seeking assets in selfstorage, many who sat on the sidelines in 2023.  As the market finds its new steady state, Buyer behavior has shifted.  Normally in a market such as this, there would be a flight to quality (Class A in the largest markets).  And while New York and Los Angeles continue to be in high demand, many of the top primary markets are seeing opportunities where the bid/ask spread for Class-A assets is too large to bridge and seller expectations are deemed as too high.   

So instead of the expected flight to quality, there is a flight to maneuverabilityBuyers (including private equity groups) are being flexible to find the right deal and are more willing to go to dip their toes into secondary or tertiary markets. The sunbelt continues to be in demand, with standout interest in the Carolinas in particular and Southeast in general.  A recent deal in Myrtle Beach that garnered 15 offers perfectly illustrates the dynamic that Buyers are willing to go further to find deals that capture a greater future opportunity with potential higher incomes migrating coming in, new housing developments, and a pathway to strong occupancy and street rates.   

There are unknownsWe will soon know more about the just underway leasing season along with the Fed rate cuts for later this yearThere is an emerging technology opportunity (or disruption) in the form of the virtual management / kiosk model as well as predictable rate analysis for dynamic pricing.   

As change brews ahead, let’s reflect on the dynamics of the current market which has adjusted for shrink rates, interest rates, and the increase in development costs.   While it’s not the Covid market, it’s still historically a good time to sell with cap rates below historical averages in storage.  

SkyView Self Storage Proprietary Technology

Here at SkyView, we have a new proprietary tech-enabled focus through a more targeted approach to speak with the right owners as they are reaching the point of considering sale.  We’ve evolved from the go-go-go of chasing deals to methodically going down the best pathsNow we all must be smarter and more creative, persistent, precise and patient.

While today’s market may lack some of the excitement of the Covid-era market, there’s something to be said about the emerging market stabilityThe bid / ask spread has been narrowing, Buyers are pinpointing their ideal asset (and occasionally getting aggressive), and there are pockets of strengthFor advisors like me, there is dialed in focus on going from listing to a successful call for offers to the persistence of getting to the close, giving the ultimate satisfaction in a satisfied sellerWhether you are looking for a market pulse check or contemplating the possibility of taking your property to market, please don’t hesitate to contact us today!

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