Guardian Storage Navigates New Storage Development in Growing Southwest Markets

Article originally published on Sparefoot.com

Fresh off its recent sale of three facilities to Extra Space, New Mexico’s Guardian Storage is planning to build two more self storage buildings, one in Albuquerque and the other just outside Phoenix, Arizona.

Paul Hedges, a partner at Guardian Storage, said he hopes to start construction next spring on a new 120,000-square-foot, three-story facility on what’s now vacant land in Albuquerque’s Northeast Heights neighborhood on the city’s east side.

Meanwhile, Guardian is in the early planning stages of building another 120,000-square-foot, three-story facility in Gilbert, Arizona, a few towns southeast of Phoenix. No timetable for that project was provided.

In both cases, Hedges sees Guardian hiring third-party managers to operate the new facilities, though no formal decision has been made yet.

The new projects follow Guardian’s sale this past summer of three self-storage facilities – one in Albuquerque and two in nearby Rio Rancho, N.M. – to Extra Space Storage Inc., the giant real estate investment trust (REIT) that previously managed the properties on behalf of Guardian.

After the summer sale, Guardian, which Hedges founded 20 years ago with his brother Dawson, was left owning three self-storage facilities, all of them in Albuquerque – and now it’s looking to replenish its portfolio with the two new development projects, Hedges said.

“Right now, we’d like to do (a new project) every couple of years and do it until we’re ready to it hang up,” Hedges, 44, said of Guardian’s long-term plans.

Guardian’s recent moves come as New Mexico’s self storage market is starting to see a noticeable uptick in building activity – and growing competition in the state from REITs and private national chains, said Hedges.

“There’s a lot more people getting into the business,” Hedges said, adding that suitable sites for new storage facilities are getting harder to find in some areas of New Mexico.

He added constructions costs for new facilities, with modern climate-control systems and other amenities, have soared to $50 to $60 per square foot, up from the $20 range when Guardian was founded 20 years ago, he said.

David Laney, a broker at Realstar CRE Advisors and a member of the advisory board of the New Mexico Self-Storage Association, agrees that New Mexico is seeing more industry activity of late. But he said New Mexico’s self-storage recovery since the last recession has been slow compared to other states.

“You go to Phoenix and you see 20 or 30 cranes in the sky. But in Albuquerque, not so much,” he said of the relative economic strengths of the two southwest cities.

In Albuquerque, business picked up only in the recent years, growing at a 2 to 3 percent annual rate, as the “new guys”—major national and regional self-storage players—enter the market, Laney said.

Too Much of a Good Thing?

One hot-spot in New Mexico is Sante Fe, where there’s growing fears of overbuilding, said Laney.

Dean Alexis, owner of two self-storage facilities in Santa Fe and a member of the advisory board of the New Mexico Self-Storage Association, said new construction in the city has indeed become “extreme.”

Several new properties are coming on line soon, including a planned U-Haul facility, adding up to a “lot of inventory,” Alexis said. “I question if the demand is there,” he said.

As for Guardian, Hedges said competition may be getting stiffer and the ability to build harder. “But it’s a good business to be in,” he said. “You just have to be careful.”

Article by Jay Fitzgerald Thumbnail from Visit Albuquerque