Self-storage construction spending surged last year by 73.3 percent across the US, breaking the billion dollar mark for the first time since 2008.
Total “mini-storage” construction, as the US Census refers to the sector, was valued at just over $1 billion last year, up from $584 million in spending in 2014, according to the latest government data released earlier this week.
Commercial construction’s fastest growing segment
Last year’s 73.3 percent growth, albeit coming from a much lower dollar base compared to other private-construction categories, still made mini-storage the fastest growing construction sector within the US commercial market in 2015.
The so-called services/parts sector saw the second highest growth in construction in the non-office commercial space, hitting $2.8 billion in 2015, a 34.8 percent increase over 2014, according to data.
The mini-storage sector’s growth rate was the fourth highest across all private-construction categories last year, with transportation equipment growing by 139 percent, sports facilities by 109 percent and chemical manufacturing by 81.2 percent, according to non-seasonally adjusted data from the US Census.
Riding the wave
Some players within the self-storage construction industry don’t need government figures to tell them that 2015 was a solid year for the industry.
“I’ve seen it boom, I’ve seen it dead and now I’ve seen it come back,” said John Bull, owner of John Bull Builders LLC, a Portland, OR builder of storage facilities for a variety of clients.
Bull said his company, which expects to double its revenue in 2016, said he’s now quoting jobs in Oregon, Washington, Tennessee, Nevada and California.
He said he’s already lined up about 250,000 square feet of construction this year in Memphis, Nashville and Portland. Another 55,000-square-foot facility, in the state of Washington, is “in the pipeline,” he said. The firm’s payroll has jumped from 2 to 36 employees just in the past two years, he added.
The uptick in new construction, which includes major expansions at existing self-storage facilities, can be felt throughout the self-storage supply chain.
“Business has been tremendous,” said Caesar Wright, president of Mako Steel Inc., a San Diego maker and installer of metal framing for storage facilities.
Wright estimated his business saw 50 to 60 percent growth last year. Demand for Mako’s products and services is particularly strong in the Pacific Northwest.
“Even our state of California has rebounded,” he said. “It’s been quite busy.”
Most orders are for relatively large facilities in the 60,000 to 80,000-square-foot range, though Mako recently landed a deal for a 155,000-square-foot facility in National City, California, just south of San Diego, said Wright.
Wright and others attribute the heightened activity to an improving economy, strong demand and tight supplies, and the easing of credit constraints. “Lenders are getting a little more lenient,” he said.
Too much hype?
Jeff Norman, senior director of investor relations at Extra Space Storage Inc., a real estate investment trust in Salt Lake City, said new construction is definitely increasing. Last year, Extra Space purchased seven newly developed storage facilities, up from just two the prior year.
But Norman cautioned that actual start-to-finish construction activity may be “less than what many people think.” Many development plans are often derailed or delayed, for whatever reasons, after building permits are issued.
“There’s more plans than actual construction out there,” Norman said.
Moderately strong pace
He said he generally agrees with a recent estimate by a commercial real estate firm that new construction will continue to grow at a moderately strong pace. The number of new facilities jumped to about 300 to 500 last year, up from more than 100 in 2014. This coming year could see construction of 500 to 600 new facilities, Norman said, citing a report from CBRE Group Inc.
But that’s still way off from the torrid pre-recession pace of an estimated 2,500 to 3,000 annual new facilities in the years leading up to the Great Recession. “We’re still far, far short of that rate,” he said.
In many parts of the country it’s still hard to find affordable land in good locations, secure necessary zoning and building-permit approvals, and, above all, land financing, he said.
All facility photos courtesy John Bull Builders’ Facebook page.