Miami, FL, is mulling two moves that would clamp down on self-storage development — moves that some industry observers welcome as a much-needed cooling-off period but that others view as government overreach.
On January 15, Miami’s Planning, Zoning & Appeals Board endorsed two proposed rules for self-storage developments in the city:
- A ban on storage facilities near certain mixed-use residential areas. The board unanimously approved this measure.
- A 270-day moratorium on new storage facilities anywhere in the city. The board approved this measure on a 5-4 vote.
The final decision on these two proposals now rests with the Miami City Council. No date has been set for a vote.
Time for a timeout
Rick Beal, co-founder of Atomic Storage Group, a self-storage management and consulting firm based in Port St. Lucie, FL, said he embraces the two proposals. Why? Because they’ll help ease the oversupply of self-storage in Miami, he said.
In December 2019, the new-supply pipeline in the Miami market represented 13.5 percent of existing self-storage inventory, according to Yardi Matrix, a supplier of commercial real estate data. That compares with 8.7 percent nationally. A Yardi Matrix report shows Miami was one of 12 U.S. markets in December that had double-digit shares of under-construction or planned facilities versus total inventory.
The Miami market’s oversupply coincides with a 2 percent year-over-year drop in average rent in December for a 10×10 non-climate-controlled unit, Yardi Matrix says.
Self-storage moratoriums in Miami and other localities “are similar to when my 5-year-old daughter misbehaves,” Beal said. “She isn’t a bad kid, but I am going to put her in a time out for a bit just to let things cool off. Hopefully, when the time out is over, the situation has changed, calmer heads can prevail and she can make better choices.”
Beal added that he thinks self-storage developers “will have to get creative in order to establish a foothold” in markets like Miami that are coping with a new-supply crunch. The Yardi Matrix report suggests that some developers likely will start pursuing opportunities in smaller tertiary markets to avoid the supply-and-demand imbalance in major markets like Miami.
Let the market decide?
Luke Elliott, executive managing director in the Self-Storage Advisory Group at commercial real estate services company Cushman & Wakefield, said he fears that widespread self-storage moratoriums could lead to undersupply in some markets, triggering pent-up demand from self-storage customers.
Self-storage moratoriums “could very well curb some new supply entering the market,” Elliott said, “but if history teaches us anything, developers will find a way to still add new product in locations where it’s warranted or needed … .”
In some oversupplied markets — “and without question, Miami is one of them” — moratoriums and declines in rental rates are prompting some developers to pull back from turning dirt on new projects, Elliott said.
Bill Bellomy, principal of Bellomy & Co., an Austin, TX-based real estate brokerage firm whose specialties include self-storage, said moratoriums like the ones proposed in Miami are good news for owners of existing facilities, as new competitors are eliminated. But he said they’re bad news for developers that have geared up, with capital and staff, to build new facilities.
Bellomy isn’t a fan of self-storage moratoriums, in Miami or anywhere else. To his consternation, he believes more communities like Miami will pass moratoriums, in part because many city leaders still regard self-storage facilities as unattractive businesses that generate little in the way of taxes and jobs.
“I do not like city council members being able to pick and choose winners, and to try to pinpoint equilibrium supply and demand — for any industry,” Bellomy said. “Let the market determine the amount of supply needed or not needed.”
