The Canadian Self Storage market has continued to be robust in the latter half of 2021. Although sales have been limited, the completed and contracted sales indicate a continued downward progression in capitalization rates for well-located assets. In most markets, occupancies and rents continue to increase, and in some cases, have reversed the typical seasonal trends seen in winter in the Canadian Self Storage market.
At present in British Columbia, Self Storage values continue to increase due to compressing capitalization rates in most submarkets. This is due in part to the record low interest rates, but also due to a significant increase in the interest in the asset class for investors. As capitalization rates continue to fall in other asset classes such as multifamily, and as the COVID-19 pandemic impacts the retail and office sectors, investors are looking to other asset classes for attractive investment opportunities.
If interest rates were to increase, it would be expected that capitalization rates would increase across all asset classes. It is possible that the Self Storage market may not see the same rate of capitalization rate increases seen in other asset classes due to the large amount of demand for Self Storage assets.
Overall, the Self Storage market across British Columbia is strong and is looking to continue with the trends set in 2021 well into 2022. At present, there is a lack of storage supply in most major markets and very few, if any, properties for sale.
Metro Vancouver has not seen any recent sales in the Self Storage space, although it is rumoured that there is a facility under contract in an off-market sale in the Tri-Cities Area. If this sale were to close at the contracted price, it would demonstrate the continued downward pressure on capitalization rates and increase in prices seen in other markets in BC and across Canada.
In Metro Vancouver, there is a great deal of development taking place with at least ten facilities in some state of development or expansion. Additionally, there have been four new facilities open within the past 18 months. These new facilities will add short term supply pressure to the markets they open in and may temporarily impact both occupancies and rental rates at existing facilities. However, the continued population growth seen in Metro Vancouver will limit these impacts in size and duration.
The Vancouver Island storage market has been very active in the latter half of 2021, with two completed sales and one firm transaction, all at record-setting price points. The population growth of Vancouver Island, as well as the lack of developable land for Self Storage, has pushed occupancies to record levels in most markets.
The CRD (Capital Regional District)
Population growth in the CRD has outpaced estimates for the past three years and is forecasted to continue at the same pace over the next decade. This population growth has increased demand for Self Storage, forcing occupancies and rates to rise above historical averages. Although Langford has had two new facilities open within the last 14 months, this has done very little to satisfy the demand for storage, with both facilities leasing up far quicker than is typically seen across the industry. There has been no new storage development within the core municipalities in the CRD and this has caused most facilities to be at capacity, with some taking waiting lists for any available units.
The Mid Island has seen an active Self Storage market with several sales in the past three years. Recently, a sale in Cobble Hill has reset many of the metrics for properties north of the Malahat. Most facilities in the Mid Island have seen occupancy increases with new facilities leasing at above average rates in the past year.
There has been very little sales activity in the North Island storage market in the past three years. Occupancies have increased during the COVID-19 pandemic, and this has also caused rental rates to rise. There has been some new development in the Courtney-Comox area, and this has been absorbing at a reasonable rate due to the population growth that has occurred in the past three to five years.
Written by Patrick Wood and Connor Braid for William Wright Commercial
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