books. From historically low cap rates, strong rental rate and occupancy rate growth, and stellar same- store NOI growth to new developments and numer- ous acquisitions, the market has certainly started to heat up.
W The Canadian self-storage industry, like most of the
Canadian economy, experienced many unprecedented events in 2021 due to the continued impacts of the CO- VID-19 pandemic. Unlike 2020, where we were in mostly uncharted territory trying to navigate a global pandemic, 2021 did bring a bit more stability to the industry and the economy as some lockdown measures were eased and the country started to figure out how to move forward, even with COVID-19 posing a continuing threat.
Discussions with numerous self-storage operators across
the country had a common theme of 2021 being one of the better years they have seen in the industry with occupan- cies high, move-ins up, move-outs down, and rental rates remaining strong—if not increasing above historic aver- ages—in most markets.
Transactions in 2021 indicated downward movement in
capitalization rates as well as record-setting prices for fa- cilities across the country. And 2021 saw an about average number of transactions when compared to pre-pandemic levels, indicating a strong appetite for storage properties in the market.
Trends At Year-End In Q3 and Q4 of 2021, there was a big push to deploy capi- tal from a number of groups active in the Canadian self- storage space. This has led to several transactions being contracted and completed at record-setting capitalization rates and prices in the latter part of 2021.
In addition to activity on the transaction side of the in-
dustry, many operators indicated that they saw occupan- cies and move-ins in the final quarter of the year above historical averages for their facilities. This indicated that the trends seen throughout the latter part of the pan- demic of higher-than-average occupancies and move-ins along with below-average move-outs seems to be continu- ing, even into the typically slower winter months.
What To Expect In 2022 As governments around the world, including Canada, start
January 2022 7
hen you look at the history of the Canadian self-storage industry, it’s safe to say that the first half of 2017 has been one for the record
to taper COVID-19 stimulus in 2022, there are some im- pacts of which the storage industry should be mindful. One of the major things to look out for is the potential for an increasing interest rate environment. Rising inter- est rates could impact not only lending rates but also the capitalization rates for existing facilities. As capital- ization rates are linked to market interest rates, an in- crease in interest rates could increase capitalization rates and lead to decreases in market values seen within the storage industry.
Another impact of the ongoing pandemic that will con-
tinue to be seen in 2022 is the record-setting real estate market across most of Canada. A great deal of self-storage business is driven by real estate. People buying and sell- ing homes are a major consumer of self-storage. In most markets, prices are up; however, transaction volumes are significantly down due to a lack of supply of properties. This reduction in real estate transactions could negative- ly impact demand for storage as fewer people are mov- ing and therefore do not need self-storage units during their move.
In addition to the expectations above, the trend of
some retail businesses moving from traditional storefront retail to more online-focused selling should continue, es- pecially as we continue to see some lockdown measures in some of the country’s most populated provinces. This movement away from traditional brick-and-mortar loca- tions has been very positive for storage facilities that of- fer flexible space and terms for businesses that no longer require a storefront presence.
Development of new self-storage facilities in 2022 will
face a number of headwinds, including possible COVID-re- lated delays if new lockdowns impact construction work- ers, supply chain issues with many components being on longer lead times or back order, and general labor short- ages that are being seen across the country. Additionally, with many municipalities still working from home, ap- proval times and consultations with municipalities for new developments will continue to take longer than what had once been the norm. All of these factors, coupled with increases in raw materials and increases in prices due to current inflation, will all make development challenging for new facilities in 2022 and beyond.
Geographic Areas Storage markets in Canada can be very geographically dif- ferent. As such, it is important to not only look at the Canadian self-storage industry as a whole but also take
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