One of the earliest indicators that the economy is beginning to improve may be that foreclosed upon self-storage businesses are beginning to sell – and to sell quickly. Early in December, Bancap Self Storage Group brokered the sale of Global Self Storage, located in Victorville in San Bernardino County, California, for $4.5 million.
Global Self Storage had been foreclosed upon early in 2009. It contains 600 self-storage units, which make up nearly 87,000 net square feet of space. The facility is located on nearly 7.5 acres of land and also includes 150 exterior RV and boat storage spaces.
“This is a classic example of a first class property that just opened up for business at the wrong time,” said Dean Keller, Bancap’s president, who brokered the deal. “The effects of the economic downturn and the temporary overbuilding in these areas have really hurt owners in outlying markets like this.”
Self-storage businesses, which are often described as “recession-resistant,” have always been one of the safest investments available during difficult economic times. As unemployment rises and houses are foreclosed on, people often turn to self-storage facilities to store their possessions as they downsize to smaller homes. But in 2008 and 2009, even the self-storage industry began to feel the pinch, and some businesses, such as Global, were foreclosed upon themselves. In an odd reversal of fortune, self-storage facilities located in areas with high levels of unemployment and home foreclosures tended to do better.
“The self-storage industry is enduring arguably one of the toughest economic environments it has ever experienced,” commented Minh Tran, managing director of Holliday Fowler LP in Houston, at around the time of Global’s foreclosure. “Consumer confidence is at an all-time low, unemployment rates are continually on the rise; and many have lost a considerable amount of money in the stock market.”
As the economy begins to pick up again, however, Keller argues that now is a good time to buy and sell self-storage businesses. “There are plenty of owners looking to ‘steal’ lender owned properties,” he says, “but we have been able to obtain good and fair prices for the sellers.”