The last two months have seen significant changes in the self-storage space. May was one of the busiest months ever–we had a lot of rentals paying high rents. Interest rates were rising, and we were underwriting conservatively, but brokers were still seeing tons of offers and activity, signifying no impact from rates yet.
June was slower than May, which is historically rare. June and July tend to be our busiest months. But we were net positive in rentals and had a big rent hike in June across facilities, so it’s too soon to say that we were harmed by the macro environment. Some of my properties are still doing really well since there’s so little competition in our markets, but we’re also hoping to lease up another 5% of our portfolio which takes a while when you price rents so aggressively.
I look at market data from REITs to see where the big movement is, listening to the quarterly calls for CubeSmart, UHaul, Public Storage, and other big players in the industry. They’re all on fire, with virtually no bad news on these quarterly calls. Rents are up, demand is strong, and business is booming. I would guess these REITs see some slowdown when they release Q2 data, but Q3 will probably be when we see the big impact. At least, that’s my guess.
This all boils down to interest rates and the Fed, just like it does with car sales and house sales. Overall it’s a good thing, and we’re very thankful we’ve been disciplined in our underwriting. Of the last 200 offers we’ve put out, we’ve been outbid on 198 of them. That’s because we underwrite realistic rent growth, normal move-in velocity, and high interest rates. If things turn south, that discipline will save us.
This may turn into an excellent time to acquire property, as there are fewer interest buyers and prices get knocked down. We finally got a new property under contract just recently. I think people will panic, rates will continue to rise, and we’ll be in a strong position to buy storage over the next six months. My job is to protect the downside and make sure we can continue growing, acquiring, and hiring.
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