Here’s how Arizona’s self-storage industry continues to flourish
Although the past two years have been challenging for most business sectors in Arizona, the state’s commercial real estate community – and the self-storage industry in particular – fared better than expected and in some cases even flourished.
“This is not the first time that the self-storage industry has shown exceptional strength in a downturn,” said John Chang, Senior Vice President, National Director Research Services with Marcus & Millichap Real Estate Investment Services, in the opening discussion, “Can the Worst of Times Deliver the Best of Times?”
“During the Great Recession, self-storage outperformed other types of real estate. More capital is coming into self-storage as major institutions see it performing well when things are not going well in the economy. This has also been true during good times,” Chang added.
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The keynote speech and other topics highlighted the 22nd Annual Arizona Self-Storage Association Conference & Trade Show held recently at We-Ko-Pa Casino Resort in Fort McDowell, Arizona. The Arizona Self-Storage Association (AZSA) is the trade association that represents the self-storage industry in Arizona.
Chang said there was an upside to Arizona’s self-storage industry during the pandemic; an industry that continues to grow as U.S. businesses are coming to grips with high inflation rates.
“Self-storage has tremendous inflation resistance,” Chang said. “Self-storage has the advantage that it can adapt quickly to rolling lease costs. While rising construction costs are affecting other types of commercial real estate, self-storage is flourishing.”
With the self-storage vacancy rate 4.6 percent in Metro Phoenix, Chang said he expects it to increase slightly. However, Phoenix continues to outpace the national average when it comes to transaction activity with Arizona sales seeing greater growth.
“The past year (2021) was the most active in Arizona for commercial real estate deals,” Chang said. “All activity was up 35 percent; the number of self-storage properties that traded was up 19 percent. The market for self-storage in Arizona is delivering strong appreciation and carries momentum.”
Delving into the economics of the self-storage industry, Chris Sonne of Newmark Valuation & Advisory, said on an institutional level self-storage is no longer considered an alternative asset class.
“Self-storage is a core asset class,” Sonne said. “The underwriting is beginning to fundamentally change. Valuation has risen dramatically. What has changed? Properties are more sophisticated, but self-storage has always been on the forefront of technology. In 2021, $20 billion was invested in the sector, $11 billion in self-storage portfolios alone.”
The conference comprised an Owners and Investors Summit and an Operational Symposium. The annual golf tournament preceded the conference at We-Ko-Pa Golf Club.
AZSA and The BSC Group kicked off the conference with the Owners and Investors Summit with host Adam Karnes. Other presentations on the first day included “Understanding the Legalities of the New Normal,” by Scott Zucker of Weissman/Zucker; and the Legislative Forecast by Lourdes Pena with Triadvocates.
The Operational Symposium kicked off with “Why? Understanding Management Summary Reports, Revenue Management and More” by John Manes of Pinnacle Storage Properties and Pinnacle Storage Managers. The final presentation is “My Lost Brothers: The Untold Story by the Yarnell Fire’s Lone Survivor” by Brendan McDonough.
Poppy Behrens, Executive Editor of MiniCo, Inc., was presented with the Pioneer Award for her years of service with AZSA. The golf tournament benefited Homes For Our Troops.