2014 Greater New Orleans Self-Storage Market Report

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1 2014 Greater SelfStorage Market Report The Stevens Realty Group, Inc. presents its first annual Greater Self Storage Market Report as a resource for owners, developers, lenders and anyone else looking for information about the local selfstorage market. For the purposes of this report the Greater Region includes the parishes of Orleans, Jefferson, St. Bernard, Plaquemines and St.. The West Bank of the Mississippi is considered as a submarket area distinct from the east bank portions of Orleans and Jefferson parishes. St. is divided into and West submarkets. The data for this survey was gathered during the summer of Attempts were made to contact every existing selfstorage facility in the regional study area to obtain information on size, occupancy, rents, operating hours and other factors. In the end, we did not get all data for all facilities. But we have a very good sample enough to paint a picture of general market conditions in Since selfstorage has only relatively recently come into focus as a real estate asset class we begin with a short discussion of the industry. An Overview of SelfStorage Selfstorage as we know it today probably started in Texas in the late 1950s or early 1960s. These rental garages, or miniwarehouses were an alternative to the storage crates offered by moving and storage companies. One clear advantage was that the customer had easy access to his goods at almost any time. The idea was an immediate success and quickly spread to other states and Canada. As time went on the row of garages in a field or an industrial location was replaced by larger, cleaner, more secure facilities. Over the past 20 years or so the trend has been to multistory, climatecontrolled buildings in retail locations. This is a result of many factors: Competition, rising consumer expectations, rising land and construction costs and the demands of communities where new storage facilities are being built. The early developers and owners of miniwarehouses were mom & pop entrepreneurs. There were few barriers to entry and development costs were low. Operating costs were low, too, and the facilities were highly profitable. Today there are still many mom & pop owners and developers, but costs have risen dramatically. Over time professional real estate developers got into the act and today there are many large local chains and national companies that own hundreds, and in a couple of cases thousands, of facilities across the US and the world. Selfstorage is an international phenomenon. Today the top 10 companies in the industry own about 14% of the rentable square footage in the country. Presented by:

2 Millions of Square Feet Growth has been rapid. The number of storage facilities increased by 1,962 per year between 1996 and 2008 a compound annual growth rate of 5.9%. But financial and other constraints have since pushed the rate of development down to an average of 669 since According to FW Dodge about 345 selfstorage construction projects are underway this year, including alterations and additions as well as new construction. Demand remains strong. Occupancy levels at public selfstorage companies are at all time highs this year, with the largest, Public Storage, reporting an average of 95%. Revenues among the four largest companies are up 5% to 9% this year. The Greater Market The size of the selfstorage market has grown apace with the nation s. Between 1996 and 2008 the number of facilities serving the eight parish metropolitan area grew by 5.9% annually same as the nation. On average, eight new facilities were added each year. But growth has averaged just two new facilities annually since Self Storage Supply New O rleans Metro Ar Liberty Self Storage UHaul Co Public Storage A Storage Inn Safeguard Self Storage AAAA Key Mini Storage Cube Smart Operators by Number of Facilities The national operators are here: Public Storage has eight facilities, UHaul has ten, CubeSmart has five and Extra Space has three. The Texasbased regional chain, AAAA Key Mini Storage, has six facilities locally. And Safeguard, which began in, has six. But none of these is the largest operator. That rank belongs to Liberty Self Storage, with 12 facilities, all on the north shore. It also commands the largest share of the market in rentable square feet. Altogether, the top seven operators control about twofifths of all the facilities in the area and almost half of all the rentable area Market conditions are currently good. Our survey shows a market area average occupancy rate of 87% as of early July. The average rent for a standard, driveup access 10x10 storage unit was $90 per month. The average price for the samesized unit, climatecontrolled, was $127 per month. (Note that some of the larger operators have very fluid rent levels they use computer programs to vary the asking price depending on how many units of each size are available and other factors. The rents can change almost daily and rent specials come and go.)

3 Rent: Standard 10x10 Occupancy Rate Square Feet Facilities We have divided the Greater Self Storage Market into seven submarket areas to be able to look at geographic variation in conditions. Here is a summary of the submarkets, ranked in order of total square feet: Source: Survey by The Stevens Realty Group, Inc. Average Physical Rent Rent Number of Total Facility Occupancy Standard CC Submarket Area Facilities Sq. Ft. Sq. Feet Rate 10x10 10x10 Jefferson 35 1,806,535 51,615 86% $89 $137 West Bank 26 1,427,985 54,923 83% $98 $118 West St. 25 1,272,405 50,896 88% $89 $ ,024,100 68,273 93% $118 $141 St ,850 43,116 86% $74 $ ,255 49,894 87% $85 $ ,100 29,763 87% $71 $90 Total or Average 132 6,808,230 51,578 88% $98 $111 Submarket Areas 2,000, ,800, ,600,000 1,400, ,200, ,000, , , , ,000 5 Jefferson West Bank West St. St. Square Feet Facilities Submarket Areas: Occupancy & Rent Jefferson West Bank West St. St x10 Rent Occupancy Rate

4 The Greater market area appears to be undersupplied. The demand for selfstorage in any area is linked to its population and the number of households. A recent study of demand at the national level finds that about 9% of all households use selfstorage at the rate of about 1.3 units per year and the average unit size is 120 square feet. Based on these parameters, the demand in the Greater market area comes to about 7.75 million square feet. The region as a whole is somewhat undersupplied since projected demand exceeds the estimated supply. The regional supply ratio of 15.4 square feet per household is less than the national ratio of about 18 square feet per household. But, storage facilities serve local market areas, not regional ones. When we look deeper, we find that some geographic submarkets may be oversupplied and others undersupplied. When it comes to understanding the market around a specific property a detailed study of the market should be made since very local market conditions may differ from conditions at the larger submarket level. In all that follows bear in mind that the estimates of supply and demand have margins of error due to many factors. Square Feet per Household Jefferson West Bank West St. St. SF/Household Regional Average Orleans Parish is the most undersupplied submarket. Projected demand exceeds supply by a large margin. There are only 9.6 square feet per household in selfstorage supply. The Orleans market faces supply constraints, foremost a lack of suitable land. There is also a shortage of suitable buildings for conversion to selfstorage. And the median household income is the lowest in the region. Yet there is abundant opportunity. Rents are well above the regional average and the population is growing rapidly. (It is still recovering from the population lost after Hurricane Katrina.), which is the fastestgrowing part of the parish (population recovery), has a supply ratio of 13.3 square feet per household, which may not be adequate for long. ( is the part of the parish to the east of the Industrial Canal and between the Intercoastal Waterway and Lake Pontchartrain.) Algiers, the portion of the parish on the west side of the Mississippi River, is also undersupplied, with a ratio of 6.6 square feet per household. The Jefferson Parish market as a whole is about in balance. The supply ratio is 17.1 square feet per household, which is close to the national average. The median household income is above the regional median. The parish spans both side of the river, with considerable population on both banks. Jefferson includes Metairie, Kenner, Jefferson and Harahan. The population has declined very slightly since 2010, to about 242,850 in Household incomes are higher here than across the river. The supply ratio is 17.6 square feet per household. There may still be some pockets of opportunity in Jefferson. Storage facilities tend to be

5 clustered in certain areas, leaving wide areas with no supply. As in Orleans, there are development constraints. West Jefferson includes Gretna, Harvey, Marrero and Westwego. The population is stable and household income is just less than the regional median. The supply ratio is 16.3 square feet per household, which is a little lower than in Jefferson. There are somewhat fewer constraints to development here than in Jefferson or Orleans. The West Bank submarket as a whole includes West Jefferson, Algiers and Belle Chasse in Plaquemines Parish. This more inclusive geography is slowly growing in population it expanded by 1.0% between 2010 and The supply ratio is 15.2 square feet per household. The median household income is just less than the regional median. Katrina devastated the Parish submarket, which is just downriver from. Many homes and businesses were destroyed, including several selfstorage facilities. The 2013 population was about 39,718. It was about 67,000 before the storm. Most of the population lives in Chalmette and Arabi, which are nearest to Orleans Parish. is recovering: The population increased by 10.6% between 2010 and The median household income is low, though just above that of Orleans Parish. Due to the earlier destruction and the current growth the market may be getting undersupplied. The supply ratio is 12.8 square feet per household, which is below the regional average. St. Parish has long been the locus of growth in the region. It has been a leader in new housing construction and commercial development and it has long been the fastestgrowing parish in the state. The median household income is the highest in the region, by far. It is still growing, although the rate of growth is now less than that of Orleans and parishes. But those areas are recovering from devastation; their growth rates will slow. St. has momentum. Two distinct submarkets exist in St.. The West St. market area includes Abita Springs, Covington, Mandeville, and Madisonville and unincorporated parts of the western half of the parish. This area has been the focus of much of the growth in the parish. Between 2010 and 2013 its population grew by 4.8%, to about 128,648. It appears to be very well supplied with selfstorage. The square feet to household ratio is 26.2, which is well above national and regional averages. St. is centered on Slidell and extends west to Lacombe and north to Bush. It has recently grown in population by 1.9%, to about 113,022 in The median household income is higher than all areas except for West St.. It is pretty well served with selfstorage, having a supply ratio of 16.3 square feet per household. For more information contact Jim Stratton with The Stevens Realty Group, Inc jim@tsgrealestate.com