2014: A Year in Review
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by admin
- December 16, 2014
- Market Monitor, What We're Reading
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Looking back over 2014, most self-storage operators continue to bask in their own glory and in general, self-storage properties continue to perform better than expected. The last six months of 2014 were markedly different than the first few months. Liquidity in the real estate debt and equity markets was supercharged over the last six months, pushing self-storage values to new record levels. It is clear that the art of real estate arbitrage is allowing buyers to achieve very compelling cash on cash returns, even while paying historically high prices. Remember it’s the ability to borrow, not the ability to pay, that sets the market price for all real estate assets.
Most independent self-storage owners still appear to be selling primarily because of life events, with few making the decision to sell in order to capitalize on the current peak in self-storage values. However, it is very apparent that institutional (non-REIT) investors took notice of the current market conditions by selling some or all of their self-storage holdings. This year, large institutionally owned self-storage portfolios came to market or were sold this year. However, it is clear that all commercial real estate is enjoying an upward swing in valuation. According to Green Street Advisors the Commercial Property Price Index (CPPI) increased by 1% in September 2014 and is up 12% since the August 2007 peak, as indicated in the chart below.
