The self-storage acquisition market in the Sunshine State is quite sunny, with no clouds in sight.
Data supplied to the SpareFoot Storage Beat by data provider Yardi Matrix shows the number of self-storage deals in the 10 Florida metro areas that it tracks jumped 64 percent from the second half of 2017 to the second half of 2018. And one self-storage broker in Florida said self-storage deal volume there should remain healthy in 2019.
David Dent, senior real estate market analyst at data provider Yardi Matrix, said deal volume in the 10 Florida markets rose from about five sales per month in 2017 to about eight sales per month in 2018.
From the second half of 2017 to the second half of 2018, the number of transactions in those 10 metros climbed from 28 to 46, the Yardi Matrix data shows. Dent said the second-half comparison offers a more accurate barometer of deal activity because the first half of 2017 “was the very highest point in storage-market optimism.”
Baby boomers and their stuff
Dent attributed much of the growth in Florida deal volume to the continuing influx of retiring baby boomers into the Sunshine State.
Given that the average boomer is now in his or her mid-60s, this age group “is in the middle of moving if they intend to do so for their golden years,” Dent said.
Furthermore, Dent said, changes in tax deductions under the federal tax overhaul are driving some boomers away from high-tax areas like Boston, MA; New York City, NY; and Washington, DC, to lower-tax places like Florida.
In line with those demographic shifts, Ryan Clark, national director of investment sales at Tampa, FL-based SkyView Advisors, said the firm is seeing the most demand for self-storage properties in parts of Florida exhibiting strong growth in population and median income.
In its 2019 self-storage investment forecast, Marcus & Millichap noted that the South Florida corridor of Miami-Fort Lauderdale-West Palm Beach ranks second (behind Dallas-Fort Worth, TX) for the number of new residents it’s welcoming, and Orlando and Tampa-St. Petersburg are beating the population gains of popular regions like Austin, TX; Charlotte, NC; and Las Vegas, NV.
According to Yardi Matrix, Miami, Orlando and Tampa-St. Petersburg were among the Florida markets that witnessed the biggest upticks in deal volume from 2017 to 2018. Relatively flat vacancy rates are bolstering deal activity in those three markets.
And when investors can’t buy them, they are building them. Orlando and Miami are seeing some of the highest rates in the U.S. of under-construction and planned facilities as a share of existing inventory — 17 percent and 15.6 percent in February 2019, respectively. Meanwhile, Tampa-St. Petersburg’s February rate stood at a more moderate 9.2 percent, according to Yardi.
Oranges, beaches, and self-storage
“Many of the Florida markets maintain strong underlying growth fundamentals and are, therefore, continuing to attract investment,” Clark said. “Additionally, the asset class continues to attract new capital seeking cash-flowing assets. The growth of investment capital seeking self-storage assets in growth markets is a significant driving force behind transaction volume.”
Clark said his firm is receiving more than 10 offers for each facility it lists for sale across primary, secondary and tertiary markets in Florida.
“Pricing continues to be very strong, especially for stabilized assets,” he said. “Bidding for properties is very aggressive, as buyers continue to be willing to compete for assets. The competition is driving pricing up on all of our deals.”
Barring any major economic disruption, Clark said he thinks deal volume in Florida will remain robust.
“Given the underlying fundamentals in Florida,” he said, “I do not see the investor appetite diminishing, unless supply becomes a significant concern in a specific market.”