RVs are on a roll. As Americans seek pandemic-era alternatives to traditional travel, they’re buying and renting RVs in huge numbers.
Research released in June by the RV Industry Association shows 46 million Americans planned to take an RV trip within the following 12 months. Eleven percent of the people surveyed wanted to buy an RV within that period and 13 percent wanted to rent an RV. Dealers and rental marketplaces say RV demand has outpaced supply.
At the same time, many recreation-starved Americans are snapping up boats and other watercraft, with some manufacturers reporting that they’re struggling to keep up with demand.
This rising tide of interest in RVs and boats is making waves in the self-storage industry. Storage operators report increased demand for RV and boat spaces, while storage brokers say few owners of RV and boat storage facilities are willing to sell at this point. In other words, it’s an owner’s market for RV and boat storage.
“It’s a good niche for these times,” said Mike Mele, vice chairman of Cushman & Wakefield and leader of its national Self-Storage Advisory Group.
Operators seeking RV and boat storage
In fact, it’s such as good niche that Mele said he and his team have recently experienced an uptick in calls about RV and boat storage facilities available for sale. Some of those calls have come from big players in the industry.
But unless an investor is going through a life change like a retirement or divorce, there’s no reason for an owner of an RV and boat storage property to sell it right now, Mele said. For one thing, these facilities generate steady cash flow. Additionally, he said, options for reinvesting the proceeds from a sale have narrowed. Now, for instance, many real estate investors are shying away from the pandemic-battered retail and hotel sectors.
In light of those factors, the value of RV and boat storage facilities will rise, Mele said.
“We’re seeing a ton of interest from buyers. But … the owners of these facilities know they’ve got something that’s good, and they’re very reluctant to part with it,” he said.
The only drawback Mele sees to owning an RV and boat storage facility today is that sales of high-end “toys” might drop off if the recession lingers.
Historically, cap rates for RV and boat storage facilities have been higher than those for traditional self-storage facilities. Whereas a cap rate for a traditional facility might be 6%, a cap rate for an RV and boat facility might be 7.5%, according to Mele. But he believes cap rates for both types of facilities are now hovering around the same level.
A surge in customer demand
Victor Mendiola, owner and principal of Plano, TX-based Promesa Investments LLC, is reaping the benefits of the pandemic-inspired RV and boat phenomenon.
Mendiola said Promesa’s 23-acre RV and boat storage facility — Covenant RV & Boat Storage in the Dallas-Fort Worth suburb of Celina, TX — became fully occupied in June. Prospective renters, roughly 90% of whom are new to RV or boat ownership, are now on a waiting list. Mendiola said he has received more inquiries about buying the property in the past 45 days or so (a few phone calls or emails per week) than he had in the previous two years.
Promesa purchased the facility in April 2018, four years after it opened. Two years ago, it featured over 500 spaces. The company wrapped up a more than 200-space expansion in March 2019.
Mendiola said this year’s surge in RV and boat sales and rentals has accelerated Promesa’s plans to build its portfolio beyond the Covenant facility, with a few deals now under contract. He’s confident that demand for RV and boat storage will remain strong. The challenge for growth in RV and boat storage, Mendiola said, is to meet heightened customer demand and to overcome barriers to entry, such as municipalities’ disdain for this type of storage and a thin supply of suitable land for development.
“We’re in the mode of we’re either going to identify future acquisitions and we’ll be able to buy those, or, if we can’t identify any acquisitions, we’ll definitely be in ground-up development mode and pursue our investment strategy that way,” Mendiola said. “I’m either going to buy it or build it — one way or another.”
Expanding RV and boat storage capacity
Tim Springer, president of Dallas, TX-based Move It Storage, said the RV and boat rush has prompted his company to speed up consideration of RV and boat expansions. That could mean adding more spaces at facilities that already offer RV and boat storage, creating entirely new RV and boat capacity at existing facilities, or even buying facilities that offer at least some RV and boat storage. Move It owns and operates 86 facilities in six states.
“It’s a good add-on product. A lot of people who have an RV also rent a storage unit,” Springer said. “It’s a complementary part of the unit mix.”