Self-Storage Cap Rate Compression Slows, but Sector Popularity Continues
The self-storage sector’s appeal seems to defy convention. Self-storage assets lack the architectural themes and fine details that produce trophy properties in the office and retail sectors. No gleaming lobbies or guest amenities like the hotel sector. Yet investors have recognized other virtues in the self-storage asset class and driven cap rates down by 275 basis points in recent years, a pace of almost five basis points per quarter, according to a recent assessment from real estate services firm CBRE.
Now, however, cap rate compression in the sector is slowing down. After the close of the first quarter of 2016, the average cap rate on transactions was 5.70 percent, a change of four basis points. True enough, the drop in cap rates has slowed, but rates are still moving in a direction that is benefitting investors and owners.
“People love storage,” says Chris Sonne, executive vice president and national self-storage valuation group leader in CBRE’s valuation and advisory services division. “While there wasn’t a lot of activity in any sector in terms of transaction volume, when you compare that to declines in other asset classes, like office, self-storage was impacted the least.”
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