Employment growth in Chicago and a steady increase in household formation pushes up the demand for more self-storage facilities, according to a report from Marcus & Millichap.
Occupancy in self-storage is improving as development ramps up in the Midwest, Marcus & Millichap reported. Consistent demand and moderate development have resulted in stable growth in 2017. In Chicago, an intense population density coupled with a booming apartment market sustained underlying storage demand, encouraging a drop in vacancy.
Buyer interest is high due to solid returns and steady operations, Marcus & Millichap said. Investors favor the Midwest because of the region’s consistency in slow steady growth. Buyer demand remains elevated, but investors are pushing back on pricing amid expectations of rising interest rates. Sellers’ expectations though have yet to adjust creating a gap between bid and ask spreads.
In 2017, employers added 60,000 workers expanding the headcount by 1.3 percent in Chicago. In addition, single-family home builders will complete 10,000 residences this year and multifamily developers will bring 8,400 units onto the Chicago market. The rate of household formation is set to increase .7 percent this year, up about 5 percent from 2007.
Job growth is strengthening and many households favoring apartments, vacancy at self-storage facilities will fall 130 basis points to 12.1 percent–the strongest dip in the Midwest region. This vacancy rate is a seven-year low and reverses the increase of the past two years.