Self Storage in Maine, Investment Vertical with Growing Demand
Throughout 2020 and 2021, self-storage development has dominated both urban and suburban markets.
There are, 50,000± self-storage units in the U.S. (90 percent of the global market), only 8.3-percent of which were vacant in 2020. Statista predicts global revenue in the sector is predicted to grow to $47-billion dollars by 2024, and Northern New England is a prime market for development.
According to SelfStorage.com, there are 211 self-storage facilities in Maine with a capacity of just under four-million square feet. That’s about 2.9 square feet of storage person per Mainer, less than the national average, and unit costs are higher in our state than others: the national average for units is just under $90 per month, while units in Saco cost out at $140 per month; in South Portland, that’s more like $163.
This means that self-storage investors in southern Maine with an eye toward the future have a chance to break ground on a growing market, taking advantage of other emerging benefits, including ease of automation and maintenance, as well as a lack of necessity for a retail frontage on the proverbial Main Street. Rather, backroad-situated properties with lower values are usable though multi-property self-storage entrepreneurs benefit from having at least one facility located in a heavily-trafficked area for advertising and marketing purposes.
Self-Storage Investing: Ease of Ownership
Drilling down to the essentials, self-storage properties require little infrastructure to develop and management to maintain.
“It’s a metal building on a slab with doors and lights. There are no tenant complaints to field, no issues with the HVAC, the plumbing, or the decor,” says Ben Spencer of Maine Realty Advisors (MRA). “Basically, it’s just keeping the property up to date, plus some snow removal and landscaping. By itself, all of that spells ‘green light’ to more hands-off investors, especially in southern Maine where high per-unit prices make investing in this sector all the more potentially profitable.”
Maine self-storage entrepreneur, Tanner Herget, traded owning and managing multiple hospitality businesses (51 Wharf, Bonfire, Drink Exchange) to enter the self-storage business in 2018, acquiring multiple such properties over time while modernizing operations in each instance.
He says there’s no more chasing down checks from tenants these days: “When I took over these facilities, most customers were stopping by and paying with checks. Now, I have nearly 90 percent of them on automatic recurring payments using a software system designed for self-storage businesses. That system syncs to the gate code, so a new customer can drive up, rent the unit online, and drive in moments later.”
Noting that making a self-storage investment profitable is about more than total occupied square footage, Herget makes a distinction between economic and area occupancy, proffering the term “facility occupancy” instead. Instead of judging profitability by area occupancy, it’s important to measure “economic occupancy,” he says. Basically, to be optimally profitable, it’s important to charge competitive rates and to have all customers paying those rates. This can lead to client turnover and attendant decline in area occupancy while still driving a better bottom line and freeing up space for higher-paying customers.
Tanner is able to apply significant annual increases in monthly rate, with short notice periods, and due to the lack of competition, retains 98.5% of his occupancy per increase.
In addition to profitability, self-storage investing in Maine has left him free to pursue other ends both personally and professionally.
“Storage seemed like a better avenue toward the lifestyle I wanted,” says Herget. “Operated correctly, the residual income is strong and continues to increase as prices go up and infrastructure development and maintenance is largely minimal as long as you do it right.”
Self-Storage Business in Maine: Growing Demand
Anecdotally, it’s seemed like self-storage facilities are sprouting up all over southern Maine, but per the numbers, Maine has less self-storage capacity per capita than most other states.
“With the rising cost per foot of acquiring and developing in the residential sector, we’ve witnessed the demand for self-storage increase dramatically,” says Spencer. “Self storage provides users with an affordable and low-maintenance option when the rest of the market is anything but.”
“You’re not dealing with a lot of calls/complaints; you’re not dealing with water and sewer issues; and many of the existing self-storage facilities are sold out as far as area occupancy, if not the stronger standard of facility occupancy,” says Spencer. “It’s much easier to manage units in this area than in multi-family buildings.”
Utilizing proper management tools and processes can make self-storage investing a lucrative opportunity, which starts with finding the right property to make the entire enterprise as profitable as possible.
As far as investment exit strategy, passive properties producing steady residual income create obvious and attractive returns to investors and come at a lower barrier to entry than other commercial products. With development costs ranging from $40-60 PSF and lease rates ranging from $10-12 PSF, with affordable and well-placed land, it’s possible to develop with a high yield and realize immediate increased equity.
“The self-storage industry is a growing market and Maine investors are seeing the benefits of this sector become increasingly desirable and profitable,” says Spencer. “Here at MRA, we have experience in this area, and if it’s not right for you, we’ll help you find other commercial real estate opportunities that are more your style.
“We’re excited about this area, though, and we’re not the only ones–so it’s time to act now if it seems like the right kind of investment for you.”
Interested in learning more about self-storage investment opportunities in Maine? Contact us today!
Written by Ben Spencer
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