Space Shop Self Storage (Space Shop), ranked a top 20 operator in the United States, sold two self-storage portfolios for $137 million to national self-storage REIT Extra Space Storage (NYSE: EXR). Totaling nine locations, the portfolio traded hands at the end of 2021. No additional transaction details are available.

“For investors, storage facilities are a historically stable investment, and portfolio transactions are testament to the strength of this real estate product,” offers Jason Linscott, partner, Stein Investment Group, parent company of Space Shop. “If you look back over the past 15 years, self-storage assets have been the steadiest real estate asset class during recessions and have also performed exceptionally well in good times; it always has its place with consumers regardless of economic conditions. Today, private equity groups are catching on and seeking opportunities to put their capital behind it.”

The first portfolio sale included five stores: a 75,000-sq. ft. facility in Covington, Ga., a suburb of Atlanta; three stores throughout Charleston, SC totaling 175,000 sq. ft.; and a 75,000-sq. ft. facility in Cary, NC, a suburb of Raleigh, NC. The package sold for $55 million, or an average of $183 per square foot. 

The second portfolio included four stores totaling 300,250 sq. ft. located in Atlanta (downtown and Buckhead) and in two suburban markets: Chamblee, Ga. and Cumming, Ga. These extremely well-located stores traded for $82 million with individual properties valued between $265 to $320 per square foot. “This transaction set a high watermark for price per square foot in Georgia,” adds Linscott. 

“With the Space Shop team, we can always count on strong real estate fundamentals and a superior product,” says Zach Dickens, CIO of Extra Space Storage. “We were pleased that the execution of the deal was seamless, and we look forward to the opportunity to work with the Space Shop team in the future.”

“You can see by the average price per sq. ft. of this transaction, self-storage is in exceptionally strong demand in these regions,” states Linscott. Cap rates for this product type are at an all-time low averaging 4.68%. Higher construction costs and an influx of supply have compressed the construction of new stores accelerating the value of existing inventory. In 2021, only an estimated 400 properties were under construction compared to 960 in 2017. “In markets with strong economic fundamentals, the value per sq. ft. increases significantly,” continues Linscott.

“Residential movement generates demand for storage, and this past year was an extremely active residential market,” offers Linscott. “During the pandemic, storage facilities were in high demand as workers made room for home offices, people migrated to new communities and homeowners embarked on home improvement projects.”

According to the NAREIT, self-storage was the top performing REIT increasing by 71.7 percent in total returns from February 2020 to October 2021. And the industry is expected to remain strong through 2022, as reported in SSA Magazine, the official publication of Self Storage Association.

Launched in 2010, Space Shop has developed more than 50 self-storage facilities totaling over 4.5 million sq. ft. The current portfolio includes 15 stores totaling 1.4 million sq. ft. predominantly in the Southeast and Midwest. An additional 15 facilities in Florida, Georgia, Ohio and Michigan, are currently under development. 

This transaction aligns with Stein Investment Group’s business goals of building strong real estate portfolios and working with only the best partners. The company seeks out and develops commercial properties with best-in-class design in exceptional locations with an intense focus on mitigating risk and maximizing value. In addition to its self-storage platform, Stein Investment Group also owns multi-family, retail and office assets; the firm has developed and acquired more than $1 billion in real estate assets since 2010.