Greater Phoenix Self-Storage Market Remains Strong
By Tyler Bush, Broker with Colliers International
Vacancies dropped, asking rents increased, transaction volume picked up, compared to this same time last year.
The Q1 2017 Market Report shows statistics on market indicators, economic trends, property sale activity, and new facilities completed during the quarter.
- The Greater Phoenix self-storage market started out 2017 overall on an upswing, vacancies crept down lower than Q1 2016, asking rents on both non-climate controlled and climate-controlled units grew year over year, and transaction volume picked up compared to this time last year.
- The vacancy rate for self-storage in the Phoenix Market at the end of the first quarter was 12.4%, a 230 basis point drop from this point last year. Despite some development headwinds on the horizon, the overall market continued to show positive absorption.
- The average asking rent for a 10x10 non-climate controlled unit for the Greater Phoenix Market came in at $109.05 and climate controlled 10x10 came in at $131.37, a 4.5% and 3.8% year over year growth respectively.
- The number of investment transactions ticked up compared to this time last year: nine self-storage properties traded hands totaling $34,047,000 in consideration, 4,905 total units, and 411,708 net rentable square feet during the first quarter.
- Over-supply concerns and the current storage development pipeline in the Greater Phoenix area are headwinds that are making lenders as well as operators cautious on the Phoenix storage market. During the first quarter, there were new construction completions of three storage properties, totaling 245,000 SF, and another five currently under construction, totaling 606,151 SF, expected to be completed in Q2 2017.
- Cap rates ticked up slightly higher than this point last year, mainly due to higher interest rates, age, occupancies, and one property that sold was a non-traditional mixed-use storage/industrial property, which impacted the average cap rate of 6.93% compared to 6% in Q1 2016. The demand for high quality, well-maintained storage properties in the Phoenix market is still extremely strong; cap rates for those type of assets are expected to remain low.
The full market report is available here: