San Diego They’re not sexy and may not spring to mind as the most obvious commercial real estate investment of choice, but self-storage centers are chugging along with a steady growth in demand and corresponding increases in rent.
In 2018, the number of new households in San Diego County will grow by about 15,000 while household earnings are expect to rise by 3.2 percent, the commercial real estate brokerage firm Marcus & Millichap reported.
Coupled with an unemployment rate consistently hovering at a little more than 3 percent in San Diego County, the result is that more people have more money to buy more stuff and they’re living in smaller apartments, so they need more places to put all that stuff, said Adam Schlosser, a first vice president of Marcus & Millichap and senior director of the firm’s national self-storage group.
“It’s a really good investment,” Schlosser said. “I would say in a year from now, you’d have at least an 8 percent growth from where it is now.”
Down-sizing baby boomers moving from single-family homes to apartments and millennials moving out on their own for the first time are among the drivers in creating the rising demand for self-storage units.
About 25 percent of self-storage units also are leased by small businesses, such as landscaping companies, to store their equipment.
Marcus & Millichap projected more than 650,000 square feet of new self-storage space would be built in San Diego County in 2018, making San Diego the top Southern California metropolitan area for delivery of new self-storage units. About 100,000 square feet of new self-storage space was completed in 2017.
North County, South County and East County led the way in construction of such new units.
Marcus & Millichap projected the average rent for self-storage units in the region would increase by 2.4 percent this year to $1.55 per square foot following a 3.8 percent increase in 2017.
Wall Street started taking notice of self-storage units as investments coming out of the Great Recession.
“All these institutions – large private equity groups – decided they wanted to start investing in self-storage,” Schlosser said.
When that happened, the landscape of self-storage changed as did the appearance.
Where older self-storage centers looked like a basic garages, newer ones are designed to look more like offices.
Pricing also has changed, with some centers adopting a hotel model with rates based on demand constantly moving up and down, depending on the market, Schlosser said.
“It’s much more efficient,” Schlosser said. “The revenue that these things are generating has skyrocketed.”