Like other real estate sectors, the U.S. self storage industry experienced the ups and downs of 2020. However, by year end, it eventually proved that the reputation it had built for itself during the last recession as a resilient sector is still valid. Adjustments indeed had to be made, with both concessions and extra safety measures adopted by most operators to ensure close-to-normal operations. But demand continued to be strong, emerging from both traditional sources associated with life-altering events like moving and downsizing as well as new ones such as businesses which needed to re-organize work environments. This allowed the industry to ride out the pandemic-induced challenges better than most. And the Phoenix self-storage market was especially strong, ranking No. 5 in sales volume in 2020.
Our research using Yardi Matrix data showed that sales of self storage facilities dropped during the early part of 2020, as might be expected, only to pick up from the summer onward. As a consequence of the strong demand, the average nationwide cost per square foot during 2020 rose to $80.1, an increase of more than 9% over 2019. This was in spite of the fact that the nationwide sales volume was down by a similar amount, 7.2%, and the amount of square footage that changed hands dropped by about twice that percentage.
As with other real estate sectors, some regions perform better than others. We took a look at the top five states in terms of increased sales volumes in 2020 compared to an average taken over 2010-2019. Using the average over previous years rules out the effect that non-typical numbers of transactions in any one year would have on our analysis.
In addition, we ranked the U.S. cities that had experienced the biggest total sales volume increases in 2020. Then we also looked at which companies had purchased the most self storage space in 2020, discovering market confidence that was widely distributed geographically.
NYC racks up the highest self storage facility sales but those in smaller towns like Napa also prosper
When looking at the US cities which saw the largest volumes of self storage sales in 2020, a different but complimentary picture emerges.
Easily heading our top 20 is New York City — with Brooklyn the borough seeing the most activity — clocking up a total of $483.3M sales in 2020, more than two-and-a-half times the number traded the year before. In 2020, CubeSmart struck a $540M eight-property deal with Storage Deluxe which included the year’s most expensive transaction, at 41-06 Delong Street in Queens’ Flushing neighborhood, costing $123M at a pricey $752 per square foot, which completed in December.
In the Los Angeles self storage sector, a Culver City property sold for $92M. In terms of cost per square foot — no less than $1,167.62 — it was the priciest in the country during 2020, and part of a $600M mixed-use development project.
San Diego comes third on the list with facilities traded in 2020 for a total of $67.4M, a $48.2M increase over the previous year. The largest transactions, located near the Old Town and in the Mount Carmel Ranch neighborhood, encompass around 100K and 70K square feet of storage and cost $285.28 and $334.29 per square foot, respectively.
Las Vegas saw total self storage sales of $64.3M in 2020, more than double the previous year’s total of $31.8M. The most expensive was a 3-acre property with 47,481 rentable square feet bought by CubeSmart from a private investor for $16.80M in March 2020, adding to the 12 they already have in the metropolitan area.
$63.2M changed hands in Phoenix, AZ, in 2020, up from $39.1 in 2019, accounting for a total of more than half a million square feet. One of the largest was a Class-A facility purchased in April by the William Warren Group for $11.90M at $110.2 per square foot which will now trade under the StorQuest Self Storage brand.
Boston, in sixth place, witnessed one of the biggest transactions of 2020, the $48.25M sale of a facility in the central Seaport District, working out at $458.34 per square foot. This transaction represented 11.8% of the city’s total 2020 inventory, more than any of the previously mentioned cities.
Napa, CA, in 7th place, is the highest ranking smaller location on our list, with $40.5M changing hands — at no less than $268 per square foot. Wilmington, NC, and Murfreesboro, TN, also find their way into the top 10, with more than double the sales activity that occurred in the previous year.
Oregon and Alabama with highest self storage sales increases, steal spotlight from more hyped markets
In 2020, compared to an average taken over the years 2010-2019, the self storage markets of Oregon and Alabama experienced higher increases in sales volumes than larger states did. Michigan, New York and Arkansas were not far behind in terms of total dollar sales increases. All these states also witnessed significant increases in the price per square foot of the storage space sold.
In terms of sales volume, New York, California and Florida attracted the most investment, with all three states seeing transactions amounting to more than $400 million in 2020.