North Palisade Partners, a development and investment firm focused on industrial, self-storage and industrial outdoor storage (IOS) and based in Northern California, recently made a big move when it named industry veteran Steve Cobbs, 50, managing director of the self-storage operation, North Palisade Self Storage.
Cobbs’ previous roles include director of self-storage at Invesco Real Estate, which he said he helped grow from zero facilities to well over $1 billion of self-storage. Before that, Cobbs was at KBS Realty in acquisitions, where he helped close over $4 billion in real estate.
He’s aiming high this time as well, taking responsibility for self-storage asset acquisitions, overseeing deal sourcing, due diligence and transaction executions. The company plans to spend at least $400 million on self-storage properties in the next 36 months, buying existing facilities and moving to on to ground-up developments.
An existing North Palisade Partners facility in Huntington Park, CA.
“We believe that buying in 2025 and 2026 will be good venture years for acquisition pricing. They will be good years to have bought something,” Cobbs said.
The Storage Beat interviewed Cobbs shortly after his appointment was announced.
What makes now a good time to invest in storage?
Cobbs: “The pricing metrics in today’s market are pretty attractive. Prices are down 20 percent to 30 percent from the peak in 2021, 2022. It means we can acquire an existing property at or below replacement cost. We also think that fundamentals are rebounding, so we think that asking rates are stabilizing. Occupancies have remained strong, still in the low-to-mid-‘90s, which is still strong. And we think capital markets are recovering. We see increased capital re-entering the market. We think that’s going to put upward pressure on prices in the future.”
What is your outlook on the declining interest rate environment?
“We think that’s positive. There are several items (interest rates, housing transactions, the ODCE Fund that we’re tracking). Interest rates are going down. We think that will apply increasing momentum for capital markets to recover. We also think declining rates will facilitate an increase in residential home sales. Home sales will provide additional demand for self-storage.”
Do you expect as an industry we will see rent growth next year over this year?
“I do think the increase will grow over next year. Asking rents have stabilized and more or less stopped decreasing, and in-place rents have been flat, even while asking rates were decreasing, so now asking rates are stabilized, I would expect in-place rates to start increasing. Also, Existing Customer Rates Increases (ECRI) are affected. A person often moves in, often are offered a rate, and in four to six months, the customers will get a rate increase that will bring them closer to a market rate.”
What mix of development vs. acquisitions do you expect?
“Any given year, the allocation will vary, but over time, I would expect that allocation to average roughly 80 percent acquisitions, 20 percent development.”
What can you do now that you couldn’t do before these changes?
“We historically have been focused on development, and we currently go roughly $900 million of assets under management One of the things I bring is asset (management), so we can acquire as well do development. We have a depth of experience within self-storage. We could do it before, and we did. But basically we’re adding to our experience of acquisitions of self-storage.
When do you expect to announce your first transaction under the new guidelines for North Palisade?
“We are actively pursuing opportunities now. It’s hard to say when we’ll close. Maybe late Q4 or early Q1.”
Bruce Goldberg
Bruce Goldberg is a freelance writer and editor based in Denver. He worked in newspapers and magazines as both a business writer/editor and sportswriter/editor for 35 years.
