NCREIF Self Storage Presentation Fall 2020
Welcome to theNCREIF Fall Conference 2020!NCREIFSector Shakeout: Self‐StorageNovember 11Mary Ludgin, PhD, Heitman
Self‐Storage OverviewOwnership Overview Highly fragmented sector, withmajority of stores owned byentity that holds one or twostores. This even after decades ofconsolidationOperatingCharacteristics Small assets with 30‐day leases.Vacancies rise during recessionsbut occupancy rebounds quickly.In tight markets, short leasesallow for multiple rent increasesin a single year. No releasing costs and lowestcapital expenditure of allproperty types Once low‐tech, sector beingtransformed by technology2
Storage Tenant Demand:Steady, Diverse, and Multi‐DimensionalUsed as supplement to storage space at homeCollege & military make up the rest10% /‐ of households rent any timeSaturation levels vary greatly by regionNumber of long‐term or life‐style renters increasingExisting customer price increases typically small percent ofgross monthly earnings (0.3%)Seeing while driving primary way of finding self‐storageNearly 70% of renters don’t have a basement10’ by 10’ most popular unitPLANNEDResidential uses are 70% /‐ of market and businesses are20% /‐UNPLANNEDMoving Out of a HouseReturn of a ChildStaging a HouseCare of a ParentDeathMoving Into a HouseDownsizing a HouseCOMMERCIALSEASONALInheritanceHome RemodelingHome OfficeCar StorageLegal ProceedingsChanging ApartmentsBusiness InventoryRecreational VehiclesDivorceGoing to CollegeBusiness RecordsHobby StorageForeclosureFinishing CollegeEquipmentChristmas PresentsDisaster Clean UpFamily RecordsLaw EnforcementHoliday DecorationsDisaster Recovery/ BackupSports EquipmentPharmaceuticalDonation ConnectionCollege Summer BreakYard CareMilitary DeploymentCompulsive HoardingWeddingBirthSource: EXR, Heitman Research3
Storage Isn’t Recession‐Proof But SELF‐STORAGE REVENUE GROWTHREIT SAME‐STORE POOLS 2000‐2020 (Q2)Revenue GrowthLong Term .0%2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020Source: REIT Reports; Heitman Research4
Storage Led in REIT Universe in Revenue GrowthSELF‐STORAGE REIT SAME‐STORE REVENUE GROWTH6.0%4.8%5.0%4.0%3.8%3.6%3.8%5‐Year Avg.10‐Year Avg. 15‐Year Avg. 20‐Year Avg.3.0%2.2%2.0%1.0%0.4%0.0%‐1.0%‐0.6%2020 Q31‐Year Avg.3‐Year Avg.Source: Company Reports5
Storage Has Regularly Led NPI in Total ReturnsNPI TOTAL RETURNS BY PROPERTY TYPE 2005 Q3 ‐2020 Q220.0%15.0%10.0%5.0%0.0%‐5.0%‐10.0%Source: NCREIF; Heitman or
This Leadership Among FactorsSparking Record ConstructionSELF‐STORAGE NEW SUPPLY1990 – 2025 (PROJECTION)7
Self‐Storage Sector Favorably PositionedThe long‐term outlook for self‐storage post‐COVID is strong in most locations as supplydiminishesStructural drivers (e.g., divorce, moving, deathare reasserting themselves)Covid‐19 may accelerate automation offacilitiesResilience of skilled operators, combined withsome distress in fragmented parts of themarket, will accelerate investment toward thesectorSTORAGE PENETRATION BY COUNTRY, GLA (SQM) PER CAPITA, 20190.870.200.160.160.120.080.04European self‐storage is a highly nascent sector,with penetration levels being 55x higher in the US.Covid has increased the opportunity set & numberof interested investors.0.060.050.050.020.020.020.010.00Source: FEDESSA/JLL8
Strong US Self‐Storage Recovery in Q3Occupancy dipped in Q2 but recovered to a record high for Q3 Move ins and outs declined in Q2; move ins recovered quickly in Q3, up 11.3% YOY, while move outs were down11.7% YOY in Q3 COVID‐19 disruption has created a windfall of demand for self storageMarket rents were down as much as 11% YOY from April to June but recovered to 2018 levels bySeptember A leading indicator for effective rent growth since in‐place rates follow asking rates9
Lease Up Properties Are Back On PaceHeitman’s lease up properties experienced accelerated leasing since COVID began Avg. 340 bps of occupancy gain per month April to Sep 2020 versus 230 bps/month last year
Transaction Volume Recovering,Cap Rates Trend Down11
Strong US Self‐Storage Recovery in Q3 Occupancy dipped in Q2 but recovered to a record high for Q3 Move ins and outs declined in Q2; move ins recovered quickly in Q3, up 11.3% YOY, while move outs were down 11.7% YOY in Q3 COVID‐19 disrupt
Cost Transparency Storage Storage Average Cost The cost per storage Cost Transparency Storage Storage Average Cost per GB The cost per GB of storage Cost Transparency Storage Storage Devices Count The quantity of storage devices Cost Transparency Storage Storage Tier Designates the level of the storage, such as for a level of service. Apptio .
income approach and use of discounted cash flow analysis (DCF) when doing appraisals for NCREIF . The analysis is often done using lease-by-lease financial software such as ARGUS or . 15% 20% 25%
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