The amount of capital rushing to buy self-storage facilities is insane. Anyone here developing self storage and selling it? Feel like its a great opportunity to be a merchant builder in this space.
If you are developing, what are you seeing costs PSF on climate controlled vs. non? Multi story vs single story?
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Hi VP in RE - Comm, the silence is deafening, sorry about that.... Any of the threads below helpful?
More suggestions...
Fingers crossed that one of those helps you.
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Self storage is a great spot for merchant build because institutions will buy ‘C O’ deals. With that said, traditionally lease up in self storage in 3-4 years. While it can and does happen faster than that, it’s still a tough asset to lease due to monthly turnover.
The hard part of merchant build in the space is if you can’t sell on Certificate of Occupancy, you need another 3 plus years to lease up.
Any idea on who the debt players are financing those 'CO' acquisitions? Debt funds? I'm at a bank (standard CRE senior balance sheet lending) and one of our clients asked us for 65% non-recourse to refinance their construction loan at C/O. I couldn't get my team on board so we had to pass. We didn't want to take on 3-4 years of lease-up risk on a non-recourse basis at that leverage point.
I used to work on self-storage, debt was bank ozk, equity was prudential
I analyzed the space for my MSRE capstone. Only in America does this model of having so much junk, being emotionally tied to it, and therefore parking it in a box until further notice (while paying for it monthly) actually work. Longer lease up duration and the shorter term, monthly lease structure does make it riskier, but still think this product type makes sense. Historically, payroll costs for security patrol, on-site presence / maintenance, etc. would be detractors. Obviously with technology (cameras / fob tracking) payroll burden is now at a minimum, but those systems will need to go in prior to CO. If you can find that sweet spot where land value is reasonable, demand / demos are there (or close enough that it still underwrites) and lastly, the local municipalities will play ball with zoning and design standards, could all of a sudden create a passive income stream while capturing longer term hold appreciation. Or, sell it immediately to the next guy / fund if you’re looking for a quick exit.
We're currently under development on 1, and have another that we'll likely close on in January (not my area of expertise). We're at about ~$145/sf all in for single story climate controlled space.
Is that 145 gross buildable sf or rentable sf?
Gross Buildable, on net rentable it's ~$190.
I've built two Class A self storage properties over the last 2 years. Happy to answer any questions...
I work on the development team for a self-storage company. Happy to answer any questions as well
Cool. What are you seeing your untrended YOC on these assets? Are you doing multi story class A or just single story developments?
Yes, both were multi-story class A and climate controlled. When approved at IC, both were around 7.5-8.00 UYOC. However, the first to deliver stabilized around a 9.0%. The second is currently delivering, so TBD on what the stablized yield looks like.
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