The flow of institutional capital into the self storage sector produced record transaction activity and pricing in 2021.
Some $10.9 billion of self storage properties traded during the year, a 161% increase over the $4.2 billion sold in 2020, and well above the previous high of $4.3 billion in 2016, according to Yardi Matrix. The growth was led by New York City, which posted $3.6 billion of sales. Some $3 billion of New York’s volume came from a single M&A deal, StorageMart’s purchase of 18 Manhattan storage facilities from parking operator Edison Properties.
Other metros with high volume included Phoenix ($468 million), Denver ($302 million) and Atlanta ($299 million). Institutional and private equity capital are focused on portfolio purchases to deploy large amounts of capital quickly.
Like transaction volume, sales price per foot took a big leap in 2021. Nationally, self storage properties sold for an average of $167 per square foot in 2021, up a whopping 50% over the $112 average in 2020 and more than double the prices paid before 2018, according to Yardi Matrix.
The growth in price reflects in part the weight of the StorageMart New York City acquisition, which accounted for 27% of the annual volume. The average price per square foot of Manhattan storage in 2021 was $612 per square foot, more than triple the national average. Manhattan real estate is expensive, even for storage facilities.
Even discounting the Manhattan deal, storage prices rose about 10% in 2021 as institutional investors entered the segment looking for stable cash flow and higher yield than multifamily and industrial properties, where competition to buy assets has driven yields to historic lows. Some institutional buyers are willing to pay higher prices for self storage portfolios because they see an upside to future cash flows, as street rates are projected to keep growing in coming years.
Other metros with high price-per-foot sales included the San Francisco Peninsula ($935), Los Angeles ($390) and San Diego ($315).