MARKET REPORT

SELF-STORAGE SECOND HALF 2019

Fort Lauderdale Metro Area

Economic Trends Employment Trends

2019 Employment Forecast: g 1.8% Absolute Change Y-O-Y% Change
32 4%

Total Nonfarm Jobs (000s)

Year-over-Year Change
Employment growth in the Fort Lauderdale metro area will slow this year compared with
2018, when 17,300 jobs were added. Through the first six months of 2019 the professional 24 3%

and business services sector has added more than 6,800 positions. The trade, transporta-
16 2%
tion and utilities sector has posted strong losses during the first half, diminishing payrolls
by 2,300 roles.
8 1%

0 0%
15 16 17 18 19*
Demographic Trends
2019 Population Forecast: g 1.3% Demographic Trends
Population Growth Household Income
The metro population is set to increase by more than 25,000 people this year. The median 8%

household income in the area is also on the rise, expected to climb 5.0 percent on an

Year-over-Year Change
annual basis in 2019. The economic expansion over recent years has influenced the accel- 6%

eration of household formation as many of the area’s residents who have often struggled
4%
to find work are now employed and financially stable enough to live independently.

2%

Supply and Demand Trends 0%

15 16 17 18 19*

2019 Construction Forecast: 1,350,000 square feet

Supply & Demand Trends
This year’s completion total will edge out last year’s 1.3 million square feet, though the
Construction Vacancy
first half 2019 has been relatively slow with only 221,000 square feet opening. The second
1,600 12%
half pipeline has nine projects on the schedule.
Completions (000s)

2019 Vacancy Forecast: g 50 basis points

1,200 9%

Vacancy Rate
800 6%
Southeast Florida, consisting of Miami, Fort Lauderdale and West Palm Beach, will post
an annual rise in self-storage vacancy to 9.3 percent. This will be the fourth consecutive 400 3%
year the area will record an expanding vacancy rate.
0 0%
15 16 17 18 19*

Rent Trends Rent Trends

2019 Rent Forecast: h 3.5% Metro United States

The average rental rate per month will regress to $1.37 per square foot in 2019, as the sec- $1.60

ond consecutive year with more than 1.3 million square feet of deliveries place additional
Rent per Square Foot

$1.20
pressure on operators. In efforts to maintain occupancy, many properties are pricing
units more competitively. $0.80

$0.40

$0
* Forecast 16 17 18 19*
Average rent is estimated based on rates for a 10- x 10-foot, non-climate-controlled unit.
 te
Average
$110 4%

$80 2%
15 16 17 18 19*

South
South Region Investment Trends
Average Price and Cap Rate Trends
Average Price Cap Rate
Trade prices for properties in the South Region have appreciated an average of 8
$100
10% percent annually for the past five years. The average sale price was $93 per square foot
Average Price per Sq. Ft.

$80 in June, making the South one of the more affordable regions for buyers to enter, with
8%
an average going-in cap rate of 7 percent.

Cap Rate
$60 6%

CAPITAL MARKETS
$40 4%

$20 2%
15 16 17 18 19*
By DAVID G. SHILLINGTON, President,
Marcus & Millichap Capital Corporation
National Self-Storage
• Fed trying to extend economic runway but hitting headwinds. The Federal
Buyer Composition
100% Reserve’s decisive action, including its rate drop in July, will support the eco-
nomic growth cycle but may be outweighed by the escalating trade war. Uncer-
75% tainty and caution increased following the Aug. 1 announcement that additional
User/Other
Percent of Total

Private
tariffs would be levied, sparking a flight to safety and the recent inversion of
50%
REIT/Listed the 10-year and two-year Treasurys. Though the Fed’s 25-basis-point reduction
Institutional of the overnight rate and early end to quantitative tightening could pose some
25%
inflationary risk, the Fed has communicated a willingness to let the economy
“run hot” in an effort to spur growth. Should core inflation rise above 2 percent,
0%
15 16 17 18 19** it will not be seen as an immediate risk. Falling interest rates, a byproduct of
the trade war and the Fed’s efforts to boost the economy, will bolster leveraged
* Trailing 12 months through June 2019 yields for investors by a small degree as lenders also look to widen spreads. With
** Year to date as of Aug. 12
Note: Buyer composition based on sales $2.5 million and greater. the yield on the 10-year Treasury now down 70 basis points from the cycle peak
last October and recently touching its lowest level since the record low set in
Edited by 2016, investment options that may not have penciled even in the second quarter
Cody Young
Research Analyst | Research Services may now be feasible. This should help moderate the buyer/seller expectation
gap that widened earlier in the year.
For information on national self-storage trends, contact:
John Chang
Senior Vice President, National Director | Research Services • Accessible liquidity balances conservative underwriting. Liquidity in the
Tel: (602) 707-9700 | john.chang@marcusmillichap.com
lending market remains readily available for self-storage assets, with a wide
Price: $250 range of local, regional and national banks; insurance companies; and CMBS
© Marcus & Millichap 2019 | www.MarcusMillichap.com sources still active. Many of these organizations have mildly reduced or main-
tained lending rates in response to the falling interest rate climate, with some
The South Region encompasses Alabama, Arkansas, Florida, Georgia,
Kentucky, Louisiana, Mississippi, North Carolina, South Carolina, instituting rate floors. While market forces are allowing assets to be readily
Tennessee, Virginia, and West Virginia. financed, softened property fundamentals have increased lender caution,
particularly for non-stabilized assets. Fluctuations in rental rates have made it
National Self-Storage Group difficult for some investors to estimate income growth for recently opened fa-
For more information, please contact:
cilities. Conversely, lending for stabilized properties in good locations remains
Joel Deis plentiful, underpinned by favorable storage demand metrics that include both
Vice President, National Director
Tel: (206) 826-5700 | joel.deis@marcusmillichap.com pro- and counter-cyclical drivers such as employment growth and elevated
divorce rates.
Fort Lauderdale Office:
Ryan Nee
District Manager
Tel: (954) 245 3400 | ryan.nee@marcusmillichap.com

5900 North Andrews Avenue, Suite 100

Fort Lauderdale, Florida 33309

The information contained in this report was obtained from sources deemed to be reliable. Every effort was made to obtain accurate and complete information; however, no representation, warranty or guarantee,
express or implied, may be made as to the accuracy or reliability of the information contained herein. No representation, warranty or guarantee, express or implied may be made as to the accuracy or reliability of
the information contained herein. This is not intended to be a forecast of future events and this is not a guaranty regarding a future event. This is not intended to provide specific investment advice and should not be
considered as investment advice. Note: Metro-level employment growth is calculated based on the last month of the quarter/year. Sales data includes transactions valued at $1,000,000 and greater unless otherwise
noted. Sources: Marcus & Millichap Research Services, Bureau of Labor Statistics, Yardi Matrix, Union Realtime, CoStar Group, Inc., Moody’s Analytics, U.S. Census Bureau.