The self storage acquisition market continues to be robust and we are seeing many new investors, both large and small, entering the space for the first time. With so many new buyers in the marketplace, it might be helpful to review a couple of the necessary steps one must take to ensure a smooth transaction and complete a successful closing.
Selecting the market you would like to invest in is the first step in identifying self storage investment opportunities. You can start by looking at markets that have certain demographic traits that you feel make for a good storage market, such as a large percentage of renters, income levels, total population, proximity to your home or office (2.5-hour flight or less), population growth percentage, number of new self storage developments underway and size of housing units, just to name a few.
After you have identified several markets that have the general criteria you are looking for, you can begin to break down each market in to submarkets. Typically, there are four submarkets in a small city and six to eight in a large to mid-sized city. To correctly evaluate a submarket, plan on spending a day or two in each city touring the areas so you can have good understanding how each market works. Doing your due diligence on a market and submarkets will help you better evaluate investment opportunities that present themselves and give you the confidence to move quickly when an investment opportunity arises.
It is important to remember that many times the large and mid-sized cities are inundated with very sophisticated self storage investors. Therefore, if you are new to the business you might be well served to look at smaller markets. At Argus Self Storage Sales Network, we have had several clients uncover some strong investment opportunities in secondary and tertiary markets where the competition from other buyers is less significant.
Be prepared to move quickly when you see an opportunity. Sometimes buyers miss out on deals that fit their investment criteria because they were too slow in submitting an LOI. It is still a seller’s market!