From "3 things in the self storage world," a brief newsletter in which Box Pro shares 3 things in or about the world of self storage and all the images are AI-generated.
“beach party in a self storage facility”
I didn’t come up with the title, but I like it - My latest article in Inside Self Storage is about increasing the value of your facility through upgrades:
Interest rates are causing projects to drop off - According to a broker I talked to at the Self Storage Association's Trade Show in Las Vegas last week (it was great to see some of you!), as many as 80% of projects planned nationwide have been canceled or delayed due to rising interest rates (not sure how scientific that number is). This information can be hard to track down, but if you're looking at a market that has a lot of incoming development, do some research to gauge which of those projects are merely planned versus under construction, cause if it's planned, there's a good chance it's not happening for a while (if at all). This certainly doesn’t mean your project won’t work—there are still plenty of deals that pencil right now. Just make sure your underwriting is tight and that you’re adjusting your leverage to meet necessary debt coverage requirements.
Metric of the Month: Cost of Occupancy - This has become one of my favorite metrics as of late. Calculating the cost of occupancy helps determine the affordability of self storage rents in a market. The formula is the annual cost of a 10x10 unit divided by the average household income. According to Mini Storage Messenger, if that figure is greater than 3.0%, rents are unaffordable and will therefore start trending downwards (assuming all other market factors are within normal ranges). Conversely, if rents are less than 3.0%, this suggests that there is enough income in the market to support higher rates. This doesn't mean it will automatically happen—existing supply, competitors, and other economic factors obviously play roles here. But it's a helpful metric nonetheless.