Section 10 • Self-Storage Valuation
for your own internal purposes, what are the most important components you concentrate on?” The overwhelming response included these four categories:
1) Determining Market Rental Rates 2) What is True Economic Occupancy? 3) Understanding Operating Expenses 4) Determining a Reasonable Capitalization Rate
All of these components are part of the Income Approach.
The following sections, written by Colliers experts, will discuss these important four components in greater detail, explaining how they are analyzed from an appraisal perspective.
Determining Market Rental Rates Determining market rent levels is a challenge for appraisers. There are several components involved, which include the ask- ing rate (street rate), actual rate (current average), the range indicated by the rent comparables, and the occupancy at the subject. Since the unit mix varies at every facility, it is common to focus on typical unit sizes (5-by-10, 10-by-10, 10-by-15, etc.).
Climate
West - 2013 West - 2013 West - 2013 West - 2014 West - 2014
Q2 Q3 Q4 Q1 Q2
National Avg. - 2013 Q1 National Avg. - 2013 Q2 National Avg. - 2013 Q3 National Avg. - 2013 Q4 National Avg. - 2014 Q1 National Avg. - 2014 Q2
Source: 2015 Self-Storage Almanac Non-Climate
Region/Year West - 2013
West - 2013 West - 2013 West - 2013 West - 2014 West - 2014
Q2 Q3 Q4 Q1 Q2
National Avg. - 2013 Q1 National Avg. - 2013 Q2 National Avg. - 2013 Q3 National Avg. - 2013 Q4 National Avg. - 2014 Q1 National Avg. - 2014 Q2
Source: 2015 Self-Storage Almanac 112 Self-Storage Almanac 2016
$128.25 $129.07 $130.35 $129.56 $131.81 $134.95
$112.51 $113.60 $114.82 $113.88 $115.63 $118.85
Table 10.1b – Average Rental Rate Per Region Climate
Non-Climate
$142.39 $143.80 $144.72 $143.80 $145.21 $148.18
$168.07 $168.94 $170.26 $169.50 $172.36 $176.32
Climate
$187.77 $188.54 $188.54 $187.09 $189.46 $193.47
$60.75 $61.66 $62.20 $62.14 $62.54 $63.71
Before the financial crisis in 2008, it was common for mar-
ket participants to utilize proforma rent levels based on asking rates. However, times have changed in that buyers and lenders are more interested in what facilities are actually collecting. With rental rates consistently increasing over the last three years, mar- ket participants are starting to ask the question, “How long can this continue?”
Table 10.1a and 10.1b reflect an example of how we compare
historical regional trends against the national average to gauge the strength of the larger market. During the appraisal process, after getting perspective on trends in the region, the focus is on the subject and local comparables. Table 10.2 provides a sample of how we determine market rent levels, while analyzing all the factors involved.
Rents levels are concluded by analyzing the asking and ac-
Table 10.1a – Average Rental Rate Per Region Non-Climate
Non-Climate
Region/Year West - 2013
$53.75 $54.30 $54.67 $54.27 $55.20 $56.64
$78.43 $78.84 $79.55 $78.84 $80.23 $82.24
tual rent levels at the subject, the current occupancy, as well as the rent comparable range. If occupancy for a particular unit size is well above the concluded occupancy for the facility, then a bump is warranted. This analysis should allow for further re- finement of where rent levels can be increased and which unit types may need extra marketing or concessions to boost income/occupancy.
Climate
Quarter Controlled 5 x 5 Controlled 5 x 5 Controlled 5 x 10 Controlled 5 x 10 Q1
$89.09 $90.18 $91.03 $90.78 $91.42 $93.12
$51.43 $51.97 $52.24 $51.81 $52.45 $53.94
$63.44 $64.39 $64.59 $63.61 $64.18 $66.18
$71.39 $72.12 $72.77 $72.11 $73.18 $75.21
$90.56 $91.87 $92.50 $91.34 $92.52 $95.46
It should be noted that rent com-
parables typically offer asking rates; therefore, even though the subject could be one the nicer facilities in the market, the concluded rates could be found near the middle or even the low-end of the range indicated by the rent comparables. A typical trend is that as the unit size increases, the price per square foot decreases. This trend is followed in Table 10.2. It is common for rental rates to increase 3
Non-Climate
$207.27 $209.79 $211.00 $210.07 $213.19 $218.09
Climate
Quarter Controlled 10 x 10 Controlled 10 x 10 Controlled 10 x 15 Controlled 10 x 15 Controlled 10 x 20 Controlled 10 x 20 Q1
$229.00 $230.07 $230.58 $229.76 $232.57 $236.69
$142.89 $144.79 $146.28 $144.66 $146.94 $151.55
$146.62 $147.57 $148.72 $147.62 $149.99 $153.72
$188.62 $190.54 $191.50 $189.82 $193.01 $198.66
$177.32 $179.84 $181.11 $179.86 $182.41 $187.01
$234.33 $235.86 $237.13 $235.18 $239.09 $245.94
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