30 Mar 2021
The Chicago metropolitan region has one of the largest and most diverse populations in the nation. It has one of the lowest self storage penetration rates. Its demographics are generally excellent, particularly its suburbs, with high median household incomes.
But all is not well in Chicagoland.
“We’re not touching anything new there with a ten-foot pole,” says Bob Soudan, a partner at Lock Up Self Storage, the Northfield, Illinois-based owner and manager of about 45 self-storage facilities in eight states around the country, seven of them in Chicago and 12 in the city’s suburbs.
The problem: High property taxes in Cook County – mixed with burdensome zoning and building regulations that many say stifle new construction, conversions or expansions of current facilities.
How high are Cook County’s property taxes? Nearly quadruple the rates in Florida, where Lock Up Storage also does business, Soudan says.
“I wouldn’t be doing business there if I didn’t think it was good__,” says John Murphy, owner and president of Next Door Self Storage, owner of 17 self-storage facilities in Illinois, including some in Chicago’s outer suburbs. “It varies from area to area.”
The Chicago/Naperville/Elgin area’s self-storage penetration rate, or the square footage of self-storage space per capita, is only 4.7, well below the national average of 5.8 and considered an attractive figure for those considering building or buying in the area, according to data from Radius Plus, the research arm of Union Realtime.
Prices in the region remained remarkably steady in the immediate years prior to last year’s onset of the pandemic, which caused wild fluctuations in prices across the county in 2020, including in the Chicago area.
Meanwhile, the occupancy rate for Chicago-area facilities owned and/or managed by major REITs is currently hovering around 95 percent, according to Radius Plus data.
Cory Sylvester, a principal at Radius Plus, agrees that there’s a sense the Chicago market is underperforming – when it could be, and should be, performing much better, at least based on the statistics.
“Despite the pandemic and all the other challenges, there’s still a lot of demand out there,” says Next Door Storage’s Murphy, whose company also operates facilities in downstate Illinois cities such as Peoria, Champagne and Springfield.
But, like Soudan, Murphy said he has no intention of entering the city of Chicago due to its high taxes, regulations and the hard-knuckle politics the Windy City is known for nationally.
The Storage Acquisition Group’s Spencer warned that people shouldn’t get too pessimistic about the metropolitan Chicago area.
“It’s a massive, massive market, both regionally and nationally,” he said. “There are a lot of good opportunities there. But you have to look for them carefully. There are excellent opportunities if you do the research.”
Source: Courtesy of The Storage Acquisition Group Thumbnail: Photo by Lance Anderson on Unsplash
