Los Angeles – Aug. 30, 2016 — Los Angeles, alongside New York, San Jose, San Diego and Baltimore, ranks among the top five undersupplied markets in the U.S. when it comes it comes to self-storage facilities, according to a new report from the Self Storage Valuation Group at CBRE Valuation & Advisory Services.
Of 38 metro markets analyzed, 16 are characterized as undersupplied; 11 are at equilibrium; and 11 are oversupplied, including Oklahoma City, Memphis, Columbus, Kansas City and Salt Lake City. For the full list of under and oversupplied markets, please see the chart included in this release.
In a high-priced market such as Los Angeles, rising apartment rents coupled with a decrease in square-footage are forcing people to downsize and search for new places for their surplus belongings. In Downtown Los Angeles, for example, the average size of newly built apartments has declined 11 percent or by about 110 square feet over the past 15 years, according to CBRE research.
“Those parts of town that have gone through a revitalization are most affected,” said CBRE Senior Vice President Nicholas Walker. “Here, a lot of developers have come in with high-end, high-density residences. We’re talking such areas as Downtown LA, Hollywood, or Beverly Hills, for example.”
Extremely high barriers to entry in the Greater Los Angeles area are keeping the supply of new self-storage facilities at bay, according to Walker.
“The cost of land is tremendous here in Southern California, and there are many restrictions to building self-storage, such as height limitations,” said Walker. “Therefore, self-storage is often not the highest and best use, and other types of developers are usually able to pay much more for a piece of land.”
Some new supply is being added as existing buildings that aren’t right on Main Street and are less desirable for other uses are being converted to self-storage, said Walker. “But that won’t nearly be enough to alleviate our undersupply. I do believe LA will continue to be supply restraint in the foreseeable future.”
The report ranks market conditions overlaid with a scoring model based on occupancy, income, and cap rate data in top Metro markets based on REIS data, along with cap rate data from the CBRE 2Q Investor Survey. The result is a ranking of top Metro Markets for self-storage, segmented among top performers and market conditions (under-supply, over-supply, or equilibrium).
Market conditions are determined by CBRE’s proprietary econometric model that compares existing supply per person to four demographic variables: population, percent of renters, average household size and average household income.
“Analysis by major Metro Markets can be useful for comparison from a national perspective but these metrics should not be relied upon for local area analysis. Factors that affect local self-storage product type include zoning regulations, local demographics, household income and density, among others,” said Christian Sonne, CRE, Executive Vice President of CBRE’s Self Storage Valuation Group. “The best analytics for this sector are by local trade area. From our Investor Surveys and zip code studies of existing facilities, it is clear the trade area for self-storage is relatively small, generally within a three-mile radius for a typical suburban property.”
To download the report, click here.
The CBRE Self-Storage Valuation group consists of 40 valuation professionals focused exclusively on the self storage sector, with access to in-depth levels of market research and real time data from the firm’s other lines of service. This market intelligence allows for the appraisers to employ the most current and detailed analysis of the market in their reports to owners and lenders. The combination of sector expertise and local market knowledge, provide for superior analytics with current data (such as the Investor Survey or other publications). The group appraises over 500 single asset facilities annually in the U.S. and completes over $2 billion in quarterly analytics for institutional investors. The team members have been extensively published, are speakers at numerous industry conferences globally, and authored the Appraisal Institute book “Self Storage Economics and Appraisal.” For more information, visit www.cbre.com/selfstoragevaluation.
CBRE’s Valuation & Advisory Services provides appraisal, property condition, market studies, feasibilities, underwriting due-diligence, environmental, zoning and telecommunication consulting services to a broad base of local, regional and global clients. It has a professional staff of more than 1,700 appraisers, engineers, architects and environmental scientists in more than 300 major metro areas globally. CBRE was named the leading global valuation services provider in the 2015 Euromoney real estate awards for the fourth year in a row. In addition to the global awards, CBRE was named as the leading real estate advisory firm in Western Europe, North America, Latin America and Africa, as well as the U.S. and in 20 individual countries.
About CBRE Group, Inc.
CBRE Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (based on 2015 revenue). The Company has more than 70,000 employees (excluding affiliates), and serves real estate investors and occupiers through more than 400 offices (excluding affiliates) worldwide. CBRE offers a broad range of integrated services, including facilities, transaction and project management; property management; investment management; appraisal and valuation; property leasing; strategic consulting; property sales; mortgage services and development services. Please visit our website at www.cbre.com.
