Any talk of commercial real estate investments is usually about retail and office spaces, industrial facilities, and multi-unit residential properties. There is, though, another niche CRE market that’s figuratively and literally full of possibilities: self-storage.
A recent list of the top 10 self-storage markets to watch has South Florida at number 8, and for some very good reasons: properties that are currently available, population, new growth centers, and, of course, the human need to hold onto stuff.
In a sense, the demand for self-storage in South Florida is a bit like the perfect storm. For starters, a large proportion of the population lives in residences that provide very little in-house storage. These properties run the gamut – from rental properties or condos to old-Florida homes or luxury hi-rise units.
There’s also the matter of demographics. At the top of the list are aging Baby Boomers, many of whom retire and head south to start a new life chapter in Florida. What many discover, though, is that despite their downsizing from their previous residence, they still have lots of stuff – collections and sentimental possessions – that won’t fit into their new location.
Similarly, Millennials and younger individuals tend to rent in bustling downtown hubs, where units are small with very little storage. As they acquire things and move to different-sized units, some items need to be stowed away for another day.
For the investor, self-storage can potentially lead to a steady income stream. Very often, self-storage facilities do not require the same amount of maintenance as a more traditional CRE space.
Additionally, the average stay in a self-storage unit is one to three years. With proper management and knowing the market, it’s possible to maintain a stable occupancy which can lead to a steady 8% to 10% return.
Despite the South Florida region sitting at #8 on a self-storage markets-to-watch list, there are still some things to consider. Some investors believe the time to have entered the market was immediately after the Great Recession when many homeowners lost their homes and a lack of storage space created a definite need.
At the same time, experts estimate that developers will complete approximately three million square feet of self-storage in South Florida in 2018. The increase in development means that there are higher vacancies, which in turn leads to lower rents.
As with any CRE investment, it’s imperative to know the market. Despite the challenges above, some developers are giving self-storage a whole new look in order to meet the changing demand. The market, it seems, has niches within its niche.
Self-storage occupants tend to live within a 1 to 5-mile radius of their storage unit. As more people opt to live in storage-limited residences in downtown areas, some developers are transforming storage facilities from rows of garages to something that looks more like a stylish office building and locating them within the community rather than on the fringes. It’s becoming more common to see multi-use building plans also include a portion of the construction dedicated to self-storage.
New projects are also racing to offer clients new perks, such as larger spaces for maneuvering bulky furniture, environmentally conscious climate controls, music, and brighter lighting. Perhaps the most niche-specific self-storage unit in the area is The Collection Suites in Doral, a facility for car-enthusiast residents of luxury condos in Miami who are in need of additional parking spaces.
Founded in 1976, Morris Southeast Group knows South Florida, its neighborhoods, its needs, and its CRE trends. For a free consultation or to learn more about our property investment opportunities and/or other services, call us at 954.474.1776. You can also reach Ken Morris directly at 954.240.4400 or via email at email@example.com.