Dream Storage Newsletter - August 2024

Monthly Newsletter

In our August edition of the Dream Storage newsletter, we share insights from the self-storage industry and transaction market.

Market Insights

The Federal Reserve indicated last week that it would likely begin cutting interest rates in September. This was welcome news for the commercial real estate industry and the broader investment community. The coming reduction in the cost of capital is anticipated to stimulate an increase in transaction activity.

There have been signs of increased deal making as large portfolios have begun changing hands between private operators in recent weeks. This activity has primarily been driven by private equity backed groups as REITs and institutional investors have largely remained sidelined. Brokers expect transaction volume to increase after what has been a historically slow first half of the year.

From our perspective, the bid-ask gap between buyers and sellers has been narrowing. In a recent offer, the top six bids, which included our own, were within 3% of the winning offer, and all were above the original asking price. This process reinforced to us that both buyers and sellers have been much more aligned with the market than in recent months.

Dream Storage’s Outlook

While we do not expect one or several rate cuts to generate the level of transaction activity seen between 2020 through early 2022, we do anticipate more deal flow than seen in the last 24 months. Lower cost of capital will help buyers and sellers continue to bridge the gap on valuations.

Next month, we will be attending the largest self-storage industry conference of the year. In our September newsletter, we look forward to sharing the insights we will have learned from our meetings and conversations. Stay tuned!

The Dream Team