2018: A View From My Perch
It is easy to spot the signs that summer is coming to an end. School supplies are on sale and kids everywhere are trading beach towels, skateboards, and baseball gloves for backpacks. It also appears that that the current run-up in self-storage values is coming to an end. Over the last 120 days we have seen interest rates uptick 25-50 basis points and there seems to be a bifurcation in pricing between “core” assets and everything else. While I would agree that many elements of the economy appear to be stable and growing, the confidence of entrepreneurial self-storage investors seems to be wavering with new supply hitting the market, overall lower occupancies, and slower rental rate growth. As a result, many entrepreneurial investors are being more conservative when underwriting self-storage investments today. On the other hand, “core” assets are still demanding historically high values due to the lack of supply of core assets in the self-storage space. If you are like me, much of the current market signs don’t seem to fit into a neat package and this makes the remainder of 2018 difficult to predict. However, if you will indulge me, I will give you two thoughts on the current self-storage real estate market that will hopefully provide some perspective for you to consider as the summer winds down.