With new supply still limited and demand continuing to rise, Sovran Self Storage CEO David Rogers sees little headwinds ahead for the self-storage industry heading into next year.
“It’s classic economics 101. Supply is muted, the demand is there and we continue to raise rates,” Rogers said during the company’s quarterly call with financial analysts.
“We don’t see any reason not to be optimistic and bullish going into 2016, that’s for sure,” Rogers said.
Sovran, which operates its facilities under the name Uncle Bob’s Self Storage, had an overall occupancy rate of 91.5 percent during the quarter with average rental rates of $12.79 per square foot. At this time last year, occupancy averaged 90.9 percent with rates at $12.19.
Generating demand
Rogers said simple population growth in its operating markets is all it takes to increase demand.
“[Self-storage] is such a generic and wide-reaching industry that if population grows, we get our commiserate share,” Rogers said.
Sovran has further boosted demand by targeting commercial customers, especially when opening new stores.
“When we add new stores we usually increase the commercial percentage in those stores,” Rogers said.
Dealing with new supply
As far as competition coming from new supply, Rogers said the company estimates between 400-450 new facilities opening in 2015.
“We don’t see a major uptick from that into next year,” said Rogers.
Paul Powell, chief investment officer at Sovran, said the company has identified 139 new facilities in its markets that either opened or were under construction during the third quarter.
“Of significance there were 44 in Texas and 34 in North Carolina, which was surprising. We didn’t expect to see that big of an uptick there,” Powell said. “We’re not too concerned, but there certainly is an uptick in new development.”
Where it can, Sovran is looking to turn some of those competing facilities into revenue generating management clients.
“We are certainly talking with the developers. They are reaching out to us, we are reaching out to them,” Powell said. “We are very active in trying to solicit that business.”
Third quarter results
During the quarter, Sovran purchased 11 self-storage facilities for $66 million. Seven facilities were located in North and South Carolina and the remaining four were located in Syracuse, NY.
The company has nine stores under contract for a total of $67 million, two of which are C of O deals.
Revenue for the third quarter totaled $95.4 million, an increase of 12 percent over the previous year. Net income for the period totaled $31.7 million, an increase of 23 percent compared to last year.
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