The Institutional Real Estate Inc Sponsorship brochure, Connected-Investor Focused, We connect people, data and insights, sponsorship, events, IREI Products
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NAREIM DIALOGUES FALL 2017 21 Although supply data is thin, there are indications that the attractiveness of the self-storage sector is starting to become more recognized by the industry. Near-term supply pressures are beginning to build in some markets, and the record- high occupancies and rent growth of 2015 and 2016 appear to have crested, equating to slower growth being forecast in some markets. What does this mean for investors? With a fundamental backdrop on solid footing, the prospect for attractive returns looks bright. However, selectivity is critical and managers most closely monitor factors like local supply growth, rising property taxes, and labor costs in specific markets. GREAT EXPECTATIONS? Maybe, but future returns in global real estate will rely on greater selectivity By taking a relative value approach to assess the attractiveness of a particular sector, managers can help investors identify the opportunities that offer the most compelling, risk-adjusted returns from a combined and comprehensive top-down and bottom up perspective. Executing on such a strategy requires a robust team with "boots on the ground" globally as well as a proven, repeatable investment process. Despite the current climate of consolidation-driven portfolio premiums and record-high pricing of individual assets, investors can still earn attractive returns in global real estate markets, but they just need to know where to look. SELF-STORAGE As baby boomers retire and look to downsize, another sector where demographic trends point toward continued growth in long-term demand is in self- storage. Characterized by fragmented ownership, low capital expenditures and monthly leases, this sector has, in the U.S. market, delivered higher returns with lower volatility than traditional real estate investments, according to NAREIT. Demand for self-storage, which is driven primarily by life events, has also shown to be less elastic and thus more resilient in times of market downturn than its peers. While the current demographics of European self-storage do not quite match the U.S. market, urbanization is also driving positive growth across large and small European cities alike. Additionally, given estimates that the European self-storage sector is around one-fiftieth of the size of the U.S sector, and that average dwelling sizes are only half as large, the potential for income growth may be even stronger in this market. SELF-STORAGE ©iStock.com/scanrail ©iStock.com/sykono