Look Who’s
Oliver Tighe Executive Director
Colliers International in Ottawa, Ont. By Erica Shatzer
I
t’s no secret that demand for self-storage is at an all-time high. Investors and end users alike are seeking secure sites across Canada to place their capital and belongings. But with occupancy rates
approaching 100 percent at many stabilized facilities, and owner-operators with little desire to sell their as- sets, it has become more challenging than ever to find suitable stores to meet their needs.
With demand surpassing supply, what’s in store for the self-storage industry in 2022?
Low Cap Rates According to Oliver Tighe, executive director of Colliers International in Ottawa, Ont., there has been a “no- table” reduction in cap rates in primary markets as well as secondary markets and tertiary markets throughout the country.
Cap rates, which are essentially a measurement of
an investment’s risk and upside, reflect projections on what buyers and sellers think can be done to improve operations. The greater the income upside, the lower the cap rate. In other words, the ability to increase a facility’s rental rates through better operations pushes cap rates down.
“The challenge is that a large percentage of owners want to keep
their facilities,” he says. “It’s tough to incentivize owners to sell.” Why? They enjoy the cash flow and tax advantages of operating
self-storage facilities. What’s more, with many independent owner- operators being retired, they enjoy running them.
18 January 2022 “Well-run facilities don’t have much juice left to squeeze, thus of-
ten do not demonstrate the lowest capitalization rates,” says Tighe. In mid-December 2021, Tighe states that cap rates in the major
markets of Toronto and Vancouver, and Montreal “to a lesser de- gree,” were in the 4.5 to 5.5 percent range. He goes on to say that cap rates were slightly higher in Canada’s secondary markets, rang- ing between 5.0 and 6.5 percent.
Though Tighe believes cap rates will stay low in 2022, he’s unsure
whether they will continue to compress. Whatever the cap rates may be, there is one thing he is certain about: The acquisitions market will continue to be aggressive this year.
The Shifting Acquisitions Market “It’s still very competitive to buy in Canada,” Tighe says, noting two main reasons for the aggressive landscape. For starters, as men- tioned earlier, few self-storage owner-operators are interested in selling their properties.
Talking
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