Self-Storage Makes History in South Florida

Something big just happened in the Sunshine State’s self-storage sector.
Michael Mele, Marcus Millichap

Michael Mele, Marcus & Millichap

Something big just happened in Florida’s self-storage sector. Emerald Hills Extra Closet Self Storage, a an approximately 128,800-square-foot facility in Hollywood, recently changed hands for $146 per square-foot, marking the highest price ever paid for a single self-storage property in the Sunshine State.

Commercial real estate investment services firm Marcus & Millichap orchestrated the disposition of Emerald Hills, acting on behalf of private investor Clausson Lexow, president of Sheridan Storage Management, and partner company Sheridan Extra Closet Ltd. Safeguard Self Storage snapped up the asset, which occupies 7.4 acres at 3090 Sheridan St., roughly 10 miles from Fort Lauderdale.

“The owner at Emerald Hills did a great job developing and maintaining the property; we were able to articulate that commitment to quality to the buyers,” Michael Mele, senior vice president with M&M, told Commercial Property Executive. Mele and Luke Elliot, associate with M&M, spearheaded the transaction.

M&M welcomed nine offers from qualified buyers and saw a bevy of other investors eye the 24-year-old asset, which was expanded in 1998 and offers room for additional development. Florida’s self-storage market is a hot ticket.

“Florida has become one of the most pro-business states in the country, due in part to the favorable tax environment.  This, coupled with a burgeoning job market, has made Florida a destination for Baby Boomers and Millennials alike, creating a tremendous need for consumer storage space,” Mele added.

The proof is in the numbers. According to a mid-year report by M&M, ongoing demand for storage space in greater Fort Lauderdale pushed the average vacancy rate down to 12.2 percent in 2014, a figure that continues to drop this year. Additionally, supply levels in the metro area are relatively low at 5.2 square feet per capita, compared to the national average of 9.4 square feet per capita.

As the market conditions–and the price tag on Emerald Hills–indicate, the investment community’s appetite for self-storage assets in Florida is unlikely to abate anytime soon. “In parts of Florida we have seen some of the larger groups moving towards secondary and tertiary markets as qualified facilities in primary markets are simply harder to come by,” Mele said. “Right now is a unique time in the market cycle; we have witnessed significant compression in capitalization rates as interest rates continue to remain low and demand continues to outpace supply both for buyers of storage facilities and renters of storage units.”

However, just because investors are hungry for self-storage product, does not necessarily mean that property owners should feed them. Mele concluded, “By no stretch of the imagination does this mean it’s the time for facility owners to sell; cash flows should be at an all-time high, and with the ability to refinance debt at record lows, there are many alternatives to selling.”