State of the Industry – Newsletter

  • May 8, 2017
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“State of the Industry”

If you attended either the SSA Spring Conference in New Orleans or the ISS Expo in Las Vegas last month, you were a part of the record attendance for each conference. Yes, our industry continues to attract new owners, operators and investors based on the superior investment returns posted the past few years by the five publicly traded self storage Real Estate Investment Trusts, the leaders in our industry.

My SVN colleague, Connie Neville of Lexington, MA recently attended a Trachte seminar held in Nashua, NH. It was standing room only to listen and learn about this niche industry sector in commercial real estate.

The Spring edition of the “REIT Magazine” had a “Sector Spotlight” on self storage, and it explained why the share price of all the self storage REITs has faltered recently, despite the “extraordinary, albeit unsustainable rental rate growth” of the past few years.

As a commercial real estate practitioner, I am also a member of the National Association of Realtors and the prestigious, SIOR organization. Our Realtor magazine this month featured the REIT industry and gave some very informative basics outlining the benefits of owning shares of stock in a REIT. The article begins by stating the definition of a Real Estate Investment Trust, “A REIT is a company that owns or finances income producing real estate”.  REITs are tied to all aspects of our economy, including apartments, hospitals, hotels, industrial facilities, shopping malls, student housing, timberlands, as well as self storage.

In addition, as of September 1, 2016, all of the Equity REITs and other real estate listed companies were transferred from the Financials Sector of the GICS to a new Real Estate Sector. This reclassification of the REITs will help create an even larger, more diverse investor base for the REIT industry.

So, why is all of this attention to our self storage sector/niche industry so important to all of us?

The reason is, “Information”!!

Since our industry is attracting so much institutional investor interest, there are now several new companies willing to make the capital investment to learn about the metrics of our industry. They are to tracking new development; watching supply and demand in numerous markets; and monitoring rental rates, discounting specifics and absorption rates. Information companies such as Yardi, REIS, STR and others are gathering information to help developers, investors and bankers make good decisions.

Very soon we are going to have more quantitative measuring techniques to determine supply vs. demand other than the Holy Grail determination factor of “7 square feet per capita”. The public transparency of information from each of the REIT companies will benefit all of us.

The REIT industry is alive and well and has benefitted our self storage industry in many positive factors.

So, I encourage you to keep up with these exciting trends in our industry by attending the local, state and/or national conferences so you can stay on top of your game!

Respectfully,

Nick Malagisi

 

 

 

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