STORAGE BUSINESS BUSTLES
With houses in need of flooding repairs, possessions need temporary homes
Self-storage lockers are filling up as Tropical Storm Harvey victims seek places for their belongings while they rebuild or prepare to move.
The market is further constrained because some storage facilities suffered flood damage as well.
“Before the storm, there just wasn’t that much product on the shelf to begin with,” said Aaron Swerdlin, a vice chairman with commercial real estate firm Newmark Knight Frank who specializes in self-storage properties.
The surge in demand could last beyond the threeto eight-month burst in business that typically follows a natural disaster. It depends on how long it will take people to fix their homes or whether they downsize to smaller places and maintain their storage units for the long haul.
“Katy to Baytown and The Woodlands to Galveston and very few places in between didn’t have an impact,” Swerdlin said.
Houston-area self-storage facilities are about 90 percent occupied, Swerdlin said, although an undetermined number of damaged units are out of service. The biggest blocks of available space are found in about 30 recently completed facilities across the Houston market.
Swerdlin, who became a self-storage customer himself after taking in water at his Bellaire home, has heard of owners of newer facilities renting 150 units in two days. That compares with normal activity of 30 to 50 units in a month for projects in the lease-up phase.
Peggy Love, whose Katyarea home took in 8 inches of water, spent the better part of Tuesday on the phone and in the car trying to secure a selfstorage unit for antiques she hopes to salvage.
“A lot of the places I called were already flooded. They were cleaning out units,” Love said. “Everybody is sold out of air-conditioned ones . ... I finally found a place on the Katy Freeway that has an unair-conditioned one.”
Love will pay a $19 move-in
rate for the first month for a 10-foot-by-15-foot unit, and then $120 per month after that on a month-to-month basis at the Private Mini Storage on the Katy Freeway.
Swerdlin said a climate controlled 10- by -10 unit in more urban areas can fetch $200 or more each month.
Bobby Grover, owner of Houston-based Big Tex Storage, is approaching full occupancy at its River Oaks location on Weslayan and is referring customers to the newer Montrose store on Richmond. The company continues to see new customers from Meyerland. Big Tex Storage sent trucks and water there to help flooded residents in the Memorial and Tax Day storms.
“There’s been a big rush on rentals for the past two weeks ,” Grover said .“I think it will continue for another one to two weeks.”
Big Tex Storage, like other companies, is offering discounts to help storm victims.
“Every single facility we’re testing or shopping had a pretty significant hurricane special, which is kind of remarkable when they didn’t have that much space to rent in the first place,” Swerdlin said.
The self-storage industry consists of several large publicly traded real estate investment trusts as well as local investors and operators. The market is highly localized, with customers wanting to be within 3 miles of their home or businesses.
Glendale, Calif.-based Public Storage reports that all 115 of its Houston area properties, totaling 77,500 units, have reopened following the storm, and a new 2,064-unit facility at U.S. 290 and Mueschke Road in Cypress had opened.
Life Storage, a national REIT based in Buffalo, N.Y., with 61 facilities in the Houston market and another eight in Beaumont, reported storm damage at six locations. Houston, which represents 8 percent of its portfolio, is its largest market.
“Our entire Southeast Texas-based team has been accounted for and for that, we are grateful,” CEO David Rogers said.
Extra Space Storage, a Salt Lake City-based REIT, has reopened all but one of its 34 properties in the Houston area. That property, in Dickinson, will need to be vacated for repairs, the company said. It has been notifying customers so they can come in and evaluate their belongings to determine whether to salvage them, dispose of them or have Extra Space Storage do that for them.
“Our great preference is for them to come and look and make sure there’s nothing
they can salvage, rather than us making that decision down the road,” said Jeff Norman, vice president of corporate communications, Extra Space Storage.
CubeSmart, a real estate investment trust based in Malvern, Pa., with substantial operations in Houston, has not provided an update on its properties.
Nationally, self-storage properties have been a magnet for investors who can make money both on the real estate and operating a business. Houston has lost a little luster with the slowdown in the economy. The city has been called out in company reports as lagging other regions for revenue growth.
Prices storage owners have been able to charge
have started to moderate because of the new buildings being added to the market, said Michael Johnson, a self-storage broker at Bellomy & Co.
And the prices investors are paying for self-storage properties have been holding steady, although recent property sales are drawing fewer offers, Johnson said.
Houston was a hot topic at the Self Storage Association conference attended by Johnson in Las Vegas this week.
“We’ve heard some peoplemake comments that this flood is really going to help the fundamental soft he storage business in Houston ,” Johnson said.