07 Apr 2022
The self-storage acquisition market is as competitive as ever, with prices and capitalization rates at record levels. For the investor looking to grab their slice of the pie, a smart strategy can be to sniff out less-than-stellar assets. If you can add value to an underperforming property, it may allow you to enter a market you wouldn’t otherwise be able to afford. It can also make the difference in your decision to invest, helping you achieve an acceptable return.
Additional real estate value can come from many sources, especially in an industry like self-storage where each facility is a real estate asset but also an operational business with cash flow. Following are several strategies consider for your new acquisitions and existing properties.
One of the fastest, easiest ways to have a positive impact on self-storage business revenue is to raise rental rates. Many facility operators are reluctant to raise rents, and most don’t do it regularly. As a result, their rates can be 20% to 30% below market average.
When a self-storage facility is built, the developer and owner make assumptions about what the market wants in terms of space (hopefully based on thorough research).
More self-storage operators are looking at full or partial facility automation as a way to streamline the business and generate more revenue.
Adding the ability to generate solar power isn’t only the “right” thing to do, it’ll nearly always be a profitable addition to a self-storage facility.
One of the best ways to increase self-storage facility performance is to add new revenue streams.
Finally, don’t underestimate the value of basic curb appeal and site maintenance.
As you can see, there are many ways to add value to a self-storage operation—significant value in many cases.
*Tom de Jong may be reached at (408) 282-3829 or at tom.dejong@colliers.com
Thomas de Jong, SIOR, MBA is Senior Vice President with Colliers International’s National Self-Storage Group and is active in self-storage brokerage, asset dispositions, site selection and self-storage consulting across the US with real estate licenses in NV, PA and CA.*
