While some feel that the bubble on storage auctions is already beginning to burst, the best is yet to come!
According to an interview published in the Wall Street Journal earlier in the year, in terms of real estate value, self storage facilities are now the biggest-ticket properties in commercial real estate—at least by one measure closely tracked by investors.
Acadia Realty Trust, a real-estate investment trust, earlier in the year sold 14 self-storage properties scattered across the New York metropolitan area for roughly $300 million to Storage Post and real-estate investment firm Heitman LLC. Storage Post is one of the largest closely held self-storage companies.
While the deal wasn’t huge by Wall Street standards, it raised eyebrows among investors because the capitalization rate on the deal was low, about 5.5%. The capitalization, or cap, rate is determined by dividing the annual net income of a property by its price. hat essentially tells an investor what the building yields on an annual basis, the same way a bond’s yield is its interest rate. As the amount that an investor is willing to pay for a building rises, the cap rate falls. In other words, falling cap rates means rising values.
Just months before this sale, the cap rates were much higher, signaling a shift in perceptions among real estate investors. However, the sale mentioned above is just one of many similar sales in the last year that bodes well for the self storage industry.
Each year more and more self storage facilities are built and as a country of consumers, we buy more stuff more than ever before in history.
As a storage auction hunter, this bodes well for you! While some auction hunters have complained that the business is no longer the same following the peak of successful auction hunting shows, the numbers disagree.
In the past few decades, the purpose of self storage has shifted. This is largely due to the greater shift in our consumer culture. We consume now more than ever. This can be attributed to a few different shifts in the culture and United States Economy. For one thing, we are a credit culture, which makes purchasing that much easier than ever before. From small every day necessities, to large purchases that we would otherwise need to save money up for, credit is part of the landscape in a way that it wasn’t when self storage first became popular in the 1960’s and 1970’s.
The United States is also no longer a production based economy. Once, we largely produced much of our own products, but now much of what we purchase is produced elsewhere in the world. This shift means reduced prices on many items that we use on a daily basis, and on larger purchases as well. These reduced prices mean that we can easily buy more of what we love, whether we need it or not!
We’re also a much more agile culture than we once were. It wasn’t so long ago that someone started and ended their life in the same town or region, maybe even working at the same business and living in the same home throughout getting married, having children, and even becoming grandparents. The cycle of life continues, but our culture today is much different. As a country we are less stationary in terms of housing and job stability. We move more, we switch careers and jobs more often than in the past. We are much more fluid in these ways, and when you couple this with our lines of credit and penchant for purchasing, this means that self storage becomes a necessity.
What does all of this mean for you as a storage auction hunter? The future looks bright! Self storage was once primarily used in specific times of crisis or upheaval, natural disasters, deaths in the family, divorces, moves. However, self storage is more prevalent today. Because we consume and purchase more, we have to put all of our things somewhere and self storage offers the answer.
As an auction hunter, this means that there will undoubtedly be more auctions and there are more facilities now than in the past, giving you the option to pick and choose auctions, auctioneers, and your favorite facilities to attend on a regular basis!