Over-development could spell rough times ahead for the storage industry in Omaha
OMAHA, Neb., Dec. 18, 2017 /PRNewswire/ -- Historically, the self storage sector has been one of the fastest growing forms of commercial real estate investment. However, Alex Burnam, Senior Acquisition Analyst at StorageMart, predicts that this sector's rising investment trend is headed for a plateau, or perhaps decline due to unbridled supply growth.
Burnam's prediction for the Greater Omaha storage industry is founded on a range of factors including unprecedented supply growth, lower barriers to entry and ease of entitlements, rising real estate taxes, and falling storage rental rates.
Omaha self storage supply will grow by at least 850,000 square feet in 2018, and constitutes a staggering 24% increase in supply to the market. In other words, there will be an additional one square foot of supply added for every man, woman and child in Greater Omaha. "Residents and businesses will reap the benefits of declining rents and higher incentives as occupancies fall for storage operators," says Burnam.
Homeowners in the western suburbs recently rebelled against the Omaha City Council and Planning Board's lax standards regarding approval of new storage developments by taking their case to the Nebraska Supreme Court. In a case against the city's approval of storage development, the court ruled in favor of the city's plan to allow storage development, which lowers barriers to entry for future storage development. According to Burnam, "It is proving to be increasingly difficult for planning officials and municipalities to deny self storage developers permission to build".
In addition to oversupply and an open door for development, the cost of operating a storage facility is greater. Burnam explains "Self storage has always been a fixed cost business with only two major variable costs in play that operators must pay close attention to: payroll and real estate taxes. With unemployment hovering around 3% in the city, property owners are facing pressure to raise wages and increase benefits to employees to attract decent talent."
In addition to the rising wage requirements to retain employees, real estate taxes on self storage properties are increasing due to the rise of valuations on the property. Local owners have reported a 35% tax increase over previous years.
The rising operating cost and the saturation of the market coupled with a lower rent requirement to attract and compete for tenants is what could make life more difficult for the self storage industry in Omaha for the next one to three years, according to Burnam.
Read Alex Burnam's full report here: https://www.storage-mart.com/blog/self-storage-industry/omaha-self-storage-industry-faces-rough-times-ahead-rising-costs-and-falling-revenue-to-stunt-investments
About StorageMart
StorageMart started with a single store in Columbia, Missouri and has grown to be the largest privately-owned, family operated storage company in the world with 198 self storage properties throughout the US, Canada, and UK. StorageMart is led by the Burnam family, which has been in the storage industry for three generations.
Dedicated to providing easy, clean, and friendly service to each and every customer, StorageMart is also committed to giving back to the many communities it calls home. In 2016, the company donated more than $142,000 to charities, in addition to donating over $350,000 in free rent to local organizations. Find out more at www.storage-mart.com.
Media Contact
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sarah.little@storage-mart.com
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SOURCE StorageMart
