The real estate market continues to be strong due to low interest rates and little inventory which drives up prices.  The commercial real estate market varies substantially by location and product type. One of the few constants in the market that seem to be remaining strong is storage facilities. With extreme volatility in other financial markets and many questions that exist in the economy, the only thing that seems like every investor agrees upon is that storage units are a safe buy in 2021. So much so, we are seeing significant development of all types of low- and high-end storage units.

Some of the reasons that storage units have continued to be highly valued is the continued low vacancy throughout the COVID-19 pandemic. Collections have also been exceeding other consumer markets.  There is a need by consumers to store items that don’t fit in their residence, some while making a move, others while downsizing, and still others that inherit “stuff” from family members. Then there are others that are coming from far away when fleeing the urban cores across the country during and after the pandemic.   

The seacoast is seeing low-end development of storage units from companies like 603 Storage (just bought by Cube Storage) who have projects in Lee and numerous other locations in NH. There appear to be numerous potential buyers for any storage facility, and numerous developers for new product as well.  Nearly all are running at full or nearly full occupancy. To date, there does not appear to be an oversupply, based on full occupancies.

As the market evolves there are more and more climate-controlled facilities that are being constructed across the market. In the past, the units were the metal box with a garage door, which were inexpensive to build and could be constructed relatively but had a short life. But it seems that the market has evolved with people wanting to store more expensive items, items that consumers did not want to have mold or mildew, including important records.  So, what appears to be a trend now is larger, climate-controlled buildings, some of which are retrofits of tired industrial, and some of which are built from scratch.  Part of that trend is that towns want the nicer looking units, not the garage doors that roll up. And you have all of the equity capital coming into the market, taking out the mom-and-pop operations, who can’t afford to build the more expensive projects. All of this has served to date, to have steady increases in the rents of all types of units. It seems that the rising tide floats all boats, so to speak, and most operators are still running at nearly full occupancy.

Again, as so often in this market, we are left with questions, Even when there are answers to many questions, there are always the few that evade us. For example,

1. Where is the market going? 
2. Will the number of units being approved and built saturate the market?
3. What will happen to the metal box storage; will it fall into disfavor?
4. What will happen to rents? 

All very good questions, but still lacking solid answers. It remains to be seen. 

Currently, in Barrington, NH there is a new type of unit that is a hybrid. It is called the Isinglass Commercial Village. This model is a combination between a storage unit and the commercial work condo (industrial condo), which has been popular with the business community for a while now. Units are well appointed, with a bathroom, kitchenette, heat, and amenities.

Years ago, this would have been referred to as a “man cave”.  It’s the place where the guys (and the ladies sometimes) would work on the car, the boat, the toys that we all seem to have, which have outgrown the room at the house. Today, it serves to protect the antique cars, RV’s, boats or Ski Doos. Some of these units actually have a design that gives the RV owner a full drive through (cuts down on the reverse accidents) with four parking spots!

Or, if you are running a small business, what a great place to have the tools, the paperwork, trucks out of the weather, equipment out of the weather and able to be worked on.

Why do these hybrid units make sense? Well, if you have to lease a 10×20 (unheated) it’s about $280 a month. With the pricing on these units, the mortgage now would be less than $700 a month!  Plus, there is depreciation and gaining equity, instead of paying rent. What could be better?

By: Dave Garvey, Managing Director & Ethan Ash, Associate Broker