Population density and barriers to entry for urban storage development are creating a perfect set-up for self-storage operators in New York City, if they can get a project off the ground.
“The demand is three times greater than the supply in the New York market and nothing will change that fact,” said Jack Guttman, co-owner of Broadway Storage Partners.
Guttman and partner Steve Schwartz own more than 20 storage properties in the New York City metro. One of the firm’s newest properties, the 1,900-unit Gotham Mini Storage in Manhattan, recently recorded a record month of leasing activity for the facility and the company. The location leased 350 units in May – more than triple its typical rental activity.
“We always experience a flood of customers, mostly students, in the beginning of the summer, but we never had anything like this,” said Guttman. “Our normal rental activity is around 100 per month, but we geared up for the move-ins this year and the results were amazing.”
Gotham has a student locker program for students to store items for the summer and that was a big source of the rental activity, he adds.
The latest surge of rental activity pushes occupancy of Gotham Mini to 97.5 percent. Built in 2013, the 150,000-square-foot facility is state-of-the-art with climate control, interior loading docks, full video security, large freight elevators and Wi-Fi.
High occupancies are the norm for the metro with most properties that have been open at least 12 months reporting occupancies of 95% or better, according to data from Broadway Storage.
The current supply of storage facilities in New York City includes 240 free-standing facilities that span about 24 million square feet of storage space, and that existing supply would have to double to keep up with demand, and that demand is growing, notes Guttman.
The strong renter demand is fueled by a high-density apartment market, as well as a concentration of distribution businesses. For example, companies that operate out Broadway Storage Facilities deliver everything from Red Bull to Time Out magazines.
If you build it…
High occupancies are pushing rents higher, especially for newer projects. New York City rents are now over $100 per square foot in several properties. For example, CubeSmart recently opened a new facility in Manhattan with asking rents that are over $100 per square foot, according to Guttman.
Among notable new projects, Public Storage opened a new location in the Powerhouse Arts District of Jersey City that includes 290 initial spaces with another 4,000 spaces that will come online at that location later this year. The development, which involves the conversion of a 100-year-old building, is part of the company’s ongoing efforts to expand in the greater New York City area. According to Public Storage, it will be the company’s largest facility in the country with the most spaces under one roof when it is fully completed.
Broadway Storage also plans to grow its portfolio and is currently looking at several properties in Manhattan, as well as nearby boroughs for new projects. According to Guttman, the firm would like to bring on 300,000 to 500,000 square feet of self-storage in the next 24 months.
“We are operating at full capacity now and hope to bring on more facilities in the future” said Guttman.
However, there continues to be sizable barriers to entry for new projects, including high costs, as well as a pending moratorium on new development. A current city proposal would require a two-year special use permit for the development of self-storage facilities in any of the city’s 21 industrial building zones (IBZs).
That moratorium will keep pressure on rates, and make both existing and newly developed properties all the more valuable, adds Guttman.