Self-storage developers say the market is driven by five d’s: Death, disaster, dislocation, divorce and downsizing. Some of those factors, and others, are on overdrive since the pandemic. Still, South Florida developers continue to drop asking rents for their facilities.
Developers agree — there’s an oversupply on the market. That’s why asking rents have gone down year-over-year, said Chris Nebenzahl, director of research for Yardi Matrix, the parent company of StorageCafe. The average rent declined by 3.5% from 2017 to 2018, 2.9% from 2018 to 2019 and 3.7% from 2019 to 2020 across Miami, Fort Lauderdale and West Palm Beach, according to the June 2020 StorageCafe report.
Still, Miami and Fort Lauderdale, in particular, kept getting new facilities. In Miami, nine new facilities were added in 2018, then nine more in 2019 and 11 are expected to be completed in 2020. Miami will have a total of 182 facilities by December with a total of 15.35 million square feet.
Broward also continued to see new facilities. Twelve new warehouses were added in 2018, then eight n 2019 and 11 are expected by late this year. Broward will have a total of 201 facilities by the fourth quarter with 17.79 million square feet in the market.
“Street rates declining is an indication of occupancy. Dade and Broward rates are doing worse in rates because of supply,” Nebenzahl said.
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New drivers are influencing the market and keeping the market steady, he said. Restaurant owners needed to remove furniture to allow for social distancing prior to Mayor Carlos Gimenez’s order and college students required a place to store their belongings when universities closed campuses in the spring.
The new influences are helping maintain Sentry’s occupancy rates, said Scott McLaughlin, executive vice president of Sentry Self Storage Management, by email. The company owns seven locations in Miami-Dade and Broward and it’s had an average occupancy rate of 92% at each location.
“We have seen some early signs of people having storage needs to allow more space at home, likely because they’re working from home more frequently, and therefore need more of a dedicated home office. We’ve also seen a need created from folks consolidating households. On the commercial side, we’ve had businesses such as bars and restaurants have to store tables and chairs in order to comply with social distancing requirements.”
Population growth is also influencing demand, said J.C. de Ona, the southeast Florida division president of Centennial Bank.
“There has been more interest due to Northeasterners migrating down to Florida during the pandemic. As they look to settle, newcomers will need more space to store their belongings in the interim,” de Ona said.
Facilities owned by the bank’s clients average about 50,000 square feet, and have seen an 80% to 90% occupancy rate since the pandemic.
Job loss and downsizing are driving occupancy rates up for some new facilities. Daniel Weinstein, the managing partner of the Coconut Grove-based MCSS Properties, opened a new 150,000-square-foot location in Coconut Grove in March. His company owns 10 locations in total across Miami-Dade and Broward.
By June, the Coconut Grove facility was 32% occupied. He had anticipated 10% occupancy, since new facilities normally increase by 2.5% per month.
“People are moving, people’s lifestyles are changing. The overall disruption in the market has caused a need for space,” Weinstein said.
Miguel Pinto, president and managing broker of the commercial real estate brokerage firm Apex Capital Realty, has clients in the self-storage market. He hears both sides — some are seeing occupancy rates grow, others are noticing a decline.
“You hear both sides. On the flip side, with people losing their jobs, people will prioritize paying for other things. At the end of the day, self-storage is a luxury.”
Regardless, the amount of supply on the market gives consumers plenty of options. As a result, developers are lowering their prices, said Zain Koita, managing partner at Knickpoint Ventures and self-storage investor since 2008.
“Pricing is a function of supply,” Koita said. The growing population will help meet supply and allow for a growth in rates in the years to come, he said.
The downward trend on rates will slow new construction of self-storage facilities, Nebenzahl said. “Self-storage has been holding its own but there are reasons for concern over the next couple of years. I don’t expect major growth.”