The state of Arizona is experiencing a period of mass migration. In fact, Maricopa County, where the city of Phoenix is located, had more people move to it than any other county in the country last year.

This influx of people moving from the west coast and an increase in apartment complexes in Arizona has created a huge demand for people to buy new self-storage facilities, which means there is also a huge demand for self storage financing.

Construction of self-storage units in Arizona remained in high demand for 2018. According to the Arizona Self Storage Association, there were 30 self-storage transactions last year, which is the largest number of transactions in Maricopa County in the last five years. On top of that, 22 new storage facilities were completed in 2018.

The start of 2019 is not showing any signs of a slow down either with 33 facilities currently under construction.

A lot of data has come out about self-storage facilities in Arizona and that data has persuaded many investors that storage facilities are a better investment than apartments right now.

One of the reasons is that self-storage facilities do not come with the operating cost that multifamily complexes come with. Switching tenants in an apartment complex can cost money because repairs and improvements to an apartment unit are needed frequently. A storage unit requires little to no repair and exchanging the unit from one renter to another just requires the renter to move their stuff out.

The Arizona market is beneficial to investors right now, but there are some concerns that the market could become oversaturated.

At the moment the number of new storage facilities being constructed is staying on pace with the number of people migrating to Arizona each year. However, if the number of people moving to Arizona suddenly decreased then we would have an influx of storage facilities and not enough people to fill them.

This can also be a concern because developers looking to turn a quick profit by building then instantly selling their self-storage might not care about the effects of oversaturation. If you are a developer looking to build and sell a property you might not be as concerned about how that property can affect the community.

However, I don’t see the Arizona market oversaturating anytime soon and developers are currently having great success finding financing for self-storage units and ultimately selling these units. The risk is often mitigated for most developers because the facility is sold before they even break ground.

The market is also in good standing because the people who are getting loans and getting their projects off the ground have tremendous experience or they are with a REIT. They know Arizona and they are doing their research.

The self-storage market in Arizona is booming right now and despite small concerns, I do not see it faltering anytime soon.

David Kotter