COLUMBIA, Mo., Oct. 14, 2015 /CNW/ -- The past five years has been very kind to the commercial real estate markets in the prairie provinces of Alberta and Saskatchewan, with investors posting record returns for most types of property. One commercial asset class that has mirrored the population and economic growth in Western Canada has been self storage development, with new facilities being erected every month to meet the anticipated demand. As more residents moved to Alberta and Saskatchewan to take advantage of the growing economy and increasing commodity prices these provinces produced, new self storage investment occurred and continues at a rapid pace in these markets.
Historically, self storage has been a great commercial asset class in Western Canada, generating strong growth and performance over the last decade. The five large Canadian banks (TD Bank, RBC Financial, Canadian Imperial Bank of Commerce, Bank of Nova Scotia and Bank of Montreal) have been active lenders supporting commercial real-estate investment in Western Canada. This commercial lending activity has also supported self storage construction and investment. However, the dramatic drop in commodity prices and overdevelopment of self storage in certain markets will constrict the economic viability and access to future lending for development.
Saskatoon, SK is a great example of a market that underscores the changes in the self storage business in Western Canada. Saskatoon is experiencing a rapid increase in self storage development, and currently has an estimated 600,000 square feet or 0.75 square feet of storage per resident. However, with the dramatic drops in the price of uranium, oil, potash, and other agricultural products, Saskatoon has experienced a decrease in population and job growth. The confluence of these economic factors is hitting Saskatoon as more self storage facilities are being built and coming online.
Expansions in progress represent a potential total of 185,000 square feet coming online in the next 6 months, and will increase total supply in Saskatoon by over 40% based on the ISS estimated current supply of 436,000 square feet. This overdevelopment will be great for local residents and businesses who use self storage, but a challenge for operators who will have to adjust to lower rental rates and offer larger incentives to attract new tenants.
To highlight the market dynamics, StorageMart, a leading North American Self Storage operator who owns a state-of-the-art multi-story facility in downtown Saskatoon on 1st Avenue that has just been expanded by 44,000 square feet, and owns another facility on 11th Street in the southwestern part of the city, has recently shelved plans to expand its 11th Street facility by an additional 50,000 square feet. StorageMart operates 63 self storage facilities in Canada and is known for its aggressive expansion strategy, however, analyses done by the company indicates that the market is becoming over saturated. As reported by Cris Burnam, the company's President, "This market just cannot bear the massive increase in supply that is coming." Aaron Facca, the Saskatchewan Regional Manager for StorageMart, adds that there is probably going to be a glut in storage units for the foreseeable future. Listed below is a snapshot of the self storage developments that are likely gearing up to enter the Saskatoon marketplace:
- Shield Self Storage is a modular building concept that is a collaboration of Brett Wilson and 3twenty solutions. The plan is to develop self storage space in increments of 6,400 square feet using their modular building technology. This technology allows them to bring 960 square feet online per week. The initial development plan is to build 60,000 square feet of self storage with 400 RV stalls.
- BRITEBOX, formerly Handyman Self Storage, is planning to add 13,000 square feet in the next three months, and the potential of an additional 50,000 square feet within the next few years between their two properties.
- Stor All Mini Storage is building out portables onsite, totaling an additional 8,000 square feet.
- Additional new self storage facilities in Saskatoon include a 70,000 square foot facility located on Marquis Drive.
Self storage consumers will benefit from falling rental rates, while self storage investors should expect slower occupancy climb for new developments as the market becomes more saturated.
Founded in 1999 and headquartered in Columbia, Missouri, StorageMart owns and operates more than 165 full-service self storage facilities throughout the United States and Canada. In addition to renting out self storage units, StorageMart properties also offer for purchase a wide variety of high quality packing and moving supplies, making each StorageMart a one-stop shopping spot for all moving, packing and storage needs.
StorageMart strives to identify non-profit organizations to work with as partners in each market the company calls home. With the help of Charity Storage, an industry wide giving program, StorageMart assists in the mission of Skate to Great, the American Red Cross, Big Brothers Big Sisters, Habitat for Humanity, local animal shelters, women's shelters, food banks and child foster care and adoption programs.
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