As many commercial real estate product types continue to languish in the San Francisco Bay Area, the self-storage sector has experienced robust growth in keeping with its reputation as a recession-proof industry.
The Bay Area had 8% year-over-year rent growth for 10-foot by 10-foot climate-controlled storage units in December, the strongest performance in the nation, according to a January National Self-Storage Report from Yardi Matrix.
Following some disruptions to the sector alongside much of society in early 2020, about 94% of the U.S. markets tracked by the report performed well for 10-foot by 10-foot non-climate-controlled units, indicating strong demand in the down market as many of the nation’s most mobile workers changed locales.
California’s Inland Empire had the second-highest growth rate for 10X10 climate-controlled units at 7% between December 2019 and December 2020. The region tied with Philadelphia and Boston for the largest increase in non-climate-controlled units at 6%.
The Yardi Matrix report’s authors concluded that the Inland Empire’s strong self-storage rental performance suggests that the region is gaining residents from the high-priced metros of S.F. and Los Angeles.
There is further evidence of that in multifamily data. While S.F.’s year-over-year multifamily rent growth fell to -9.4% between December 2019 and December 2020, the Inland Empire and Sacramento topped the nation at 7.3% and 6.1%, respectively, according to a National Multifamily Report by Yardi Matrix, underscoring the trend’s uneven impact on CRE based on region.
The self-storage boom may also point to many viewing their Bay Area departure as temporary. Paying for storage in a city one never plans to return to isn’t generally practical. In the context of the coronavirus pandemic, the rise in self-storage demand could also signify that many people aren’t yet certain where they will land permanently. More than half of those interviewed for a S.F. Chronicle article about those leaving the Bay Area said they might return.
Albert Turner, who works in marketing and customer relations for Affordable Self-Storage on S.F.’s Treasure Island, told Hoodline that he “hasn’t seen customer demand like this since 2008.” The article also cited a tech worker who recently moved from S.F. to Oakland and then back to S.F. again, all while relying on self-storage units to get through the lingering uncertainty of the pandemic’s outcome.
Despite the self-storage sector’s ability to capitalize on the economic fallout, the continuing public health crisis leaves doubt about future performance. Although nationally, self-storage projects in the development pipeline accounted for 8.3% of inventory, Yardi Matrix data showed that developers abandoned 23 projects in December.
The S.F. Bay area came in at No. 14 for regions with the most self-storage under development, behind New York and Sacramento, which came in at Nos. 1 and 2, respectively.
Responding to demand, self-storage developer InSite Property Group recently bought a 10.4-acre site at 1014 Chesley Ave. in Richmond that’s been vacant for over 20 years from Modico Capital, according to a Jan. 15 press release. The industrial site, previously owned by World Oil Corp., is planned for a 112K SF self-storage facility.
“Repurposing this property represented a challenge on multiple fronts,” Modico Capitol President Trey Clark said in the press release. “The property is zoned for light industrial use, but the difficult access for large trucks make most industrial uses unrealistic. The residential uses adjacent to the site further limit appropriate uses. Finally, the light industrial zoning code had been reworked recently to eliminate many of the more dormant industrial uses that would have been a good fit. We are pleased the city of Richmond has decided to move ahead with the much-needed self-storage development, and believe the community will benefit from the improvements to a lot that has been vacant for years.”