Why Connectivity, Flexibility Are Pivotal in Self Storage
Ben Carr, president of Miami City Self Storage Development & Investment Co., discusses the unfolding trends in the industry and reveals details about South Florida’s market particularities.
The self storage industry is one of the rising sub-sectors of commercial real estate. Favorable demographic trends and strong economic fundamentals have been fueling the growth of the industry across the U.S. Due to the popularity of the asset class, more and more developers and investors are entering the self storage sector, stimulating businesses to look for alternative strategies in order to stay ahead of competition.
Ben Carr, the newly appointed president of Miami City Self Storage Development & Investment Co., offers his insights on what makes the self storage product successful in 2019 and what developers and investors should focus on to adapt to the changing market trends. Additionally, Carr sheds light on the current state of the Miami self storage market.
How has the South Florida market changed during the past year?
Carr: South Florida has various submarkets with substantially different cultures and population densities, but regardless of specific submarket nuances, South Florida continues to be a healthy region as compared to one year ago. Development remains strong across real estate sub-sectors, from retail to multifamily to self storage. While there has not been a substantial change in the real estate market from one year ago, the continued attractiveness of the region is encouraging.
What are the Miami self storage market’s biggest strengths?
Carr: The Miami self storage market is a healthy one. Over the last 36 months, we have seen new facilities developed and we continue to see those facilities lease up, a sign of ongoing demand for the product, albeit with some submarkets experiencing near-term rate pressure during lease up. Additionally, the market has seen multiple transactions with diverse buyer profiles including existing Miami investors as well as investors new to Miami.
What does it take for a self storage provider to be a front-runner in 2019?
Carr: Connectivity. Those providers that outperform their competitors have more impactful connections to their consumers in various ways such as on-site interaction, online reviews, efficient and effective rental experiences, social media engagement and post-rental follow-up. The moving process can be an incredibly stressful one and those providers that offer a useful storage solution, while minimizing the heightened stress level through strong connectivity, continue to stay ahead of their competitors.
What trends will define the self storage market in 2019 and 2020?
Flexibility. The self storage market has providers and consumers. The providers include public and private companies with varying structures. Whether we examine in-house development of new facilities, purchasing of existing facilities, repositioning balance sheets, diversifying holdings, evolving online presence or unique offerings to the consumers, the self storage market will be altered over the next period by the providers’ ability to remain flexible during potentially changing economic times and advancements in technology that yield new offerings.
Consumers will continue to evolve their flexibility as well. While wide usage of smartphones currently exists, the consumers’ education of their available options may have only just begun. From competition of existing self storage facilities to logistical valet services to portable storage units, the consumers’ options have grown over the last five years and will continue to evolve over the coming years.
What are the key elements that need to be considered when delivering a new product in today’s self storage market?
Carr: In today’s market, whether developing or acquiring self storage, a thorough due diligence process must be executed. While this should always be the case with any prudent buyer when assessing potential real estate deals, there is less margin for error in today’s market due to the record length of the economic expansion and the new supply that has appeared as a result of strong fundamentals. Key review elements include the economic health of the site’s geographic market and submarket, the existing and projected self storage supply per capita, input costs to the development process and cost of capital/debt.
So far, MCSS has focused mostly on expanding its presence in South Florida. What other markets do you plan to add to your portfolio?
Carr: In addition to Miami, we currently have deals in various stages in New York, New Jersey and California. Whether we develop new facilities or acquire existing facilities, we are focused on markets with strong fundaments and examine many variables such as recent and expected population growth, household composition and industry composition. While our analysis is ongoing and reflects the dynamic nature of each market’s profile, our investment thesis includes a longer-term view of strength in each market we consider investing. Market growth, households requiring additional space and healthy industry exposure are just some of those data points we consider.
With relationships all over the U.S., our pipeline is a constantly moving target and includes development opportunities as well as the acquisition of existing facility opportunities. We are currently assessing over 30 development sites and 10 facility acquisition opportunities in at least 10 markets.