Brace yourself: Property tax increases are coming for self-storage

Written on August 16, 2017 at 02:24 PM

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Self-storage is starting to become a victim of its own success. Operators are reeling from a double punch—rising tax rates across many jurisdictions along with higher assessed property values.

The specter of rising assessments is coming just as large and small operators alike are expected to face greater competition from new development and decelerating revenue over the months ahead.

“Taxes have always been a very large expense line item and they are becoming the largest very quickly on almost every property as all of these jurisdictions hustle for more money,” said Kenneth Nitzberg, chairman & CEO of Devon Self Storage Holdings in Emeryville, CA.

Devon operates 46 facilities in 15 states and has seen property taxes rise at its facilities all across the country.

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Categories: Industrial, Real Property, Paradigm Info, Self Storage

NREI: Six Property Types Strong Enough to Thrive in a Recession

Written on November 15, 2016 at 04:03 PM

For some time now, the industry has been mulling when the commercial real estate cycle’s historically-long recovery will end and an economic downturn will begin.  By the end of 2018, the economic model created by research firm CoStar Portfolio Strategy predicts an 80 percent chance of a recession, says Rene Circ, director of research at CoStar Portfolio Strategy. Circ points to variables, such as the unemployment rate nearing full employment and business investments down, that are flattening the yield curve and pointing to a recession. Circ also cautions that the Federal Reserve raising interest rates will be a negative to the yield curve. Although the next recession is expected to be milder, the National Real Estate Investor took a look at what asset types are better positioned than others to weather an economic downturn.

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Categories: Distribution Centers, Industrial, Real Property, Retail, Warehouse, Self Storage, Medical

Business is Booming for Self-Storage Industry

Written on October 15, 2015 at 07:45 AM

It's a good time to be in the self-storage industry, as rents continue to rise, units are almost completely occupied, and competition is low due to limited new construction. One factor that benefits the industry is the fact that demand for storage space is relatively steady as it reflects life changes, referred to in the industry as the 4Ds--death, divorce, downsizing and dislocation, and not the economic cycle. Therefore, the storage business is considered "recession-resistant." Although expected to grow, tight supply is also benefiting the industry, and building new units can take years to complete.

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Categories: Real Property, Self Storage

Investors in Bidding War for Self-Storage Properties

Written on June 17, 2015 at 11:26 AM

A new bidding war is breaking out in the self-storage industry, as REITS and other investors are attracted to the sector's stable returns. A 97,000-square-foot self-storage facility in Orlando, Fla., recently sold for $11.8 million to Westport Properties Inc., after a bidding battle among 18 potential purchasers, including several REITs, according to the Wall Street Journal. This situation exemplifies the attention the self-storage market is receiving, as the seller received a price of about $121 a square foot, a significant premium over the $100-a-square-foot average sales price commanded by storage properties in the Orlando market, despite the fact it wasn't an A-quality facility or ideal location.

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Categories: Real Property, Florida, Self Storage

NREI: As Self-Storage Cash Flows Rise, Competition for Assets Compresses Rates

Written on September 02, 2014 at 12:37 PM

As the multifamily sector has skyrocketed from the recession, the niche self-storage industry is attracting all types of new investors looking for safe returns. According to the National Real Estate Investor, both occupancy and rents continue to rise at self-storage properties, particularly as construction is only meeting a fraction of demand. And as self-storage cash flows rise, competition for assets has compressed cap rates for portfolios, the current bread-and-butter for the top REITs. Occupancy has increased to the low 90s percent mark at all four of the major industry trusts—Public Storage, Extra Space Storage Inc., CubeSmart and Sovran Self Storage—according to a second quarter report by Chicago-based analyst firm MJ Partners. Revenue increases at the four trusts ranged from 5.3 percent to 8.6 percent for the quarter, according to the report, and net operating income increased from 6.9 percent to 10 percent. Accordingly, national asking rental rates in the first half of 2014 increased 1.1 percent from the same period last year.

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Categories: Real Property, Multi Family, Self Storage

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