MARKET REPORT

SELF-STORAGE SECOND HALF 2019

West Palm Beach Metro Area

Economic Trends Employment Trends

2019 Employment Forecast: g 2.5% Absolute Change Y-O-Y% Change
24 4%

Total Nonfarm Jobs (000s)

Year-over-Year Change
West Palm Beach employers bolstered payrolls by 13,900 individuals during the past 12
months ended in June. Professional services, education and health-related openings 18 3%

accounted for more than half of this job creation. The metro is expected to add 16,000
12 2%
positions this year, an increase from the 14,800 people hired in 2018.

6 1%

Demographic Trends 0
15 16 17 18 19*
0%

2019 Population Forecast: g 2.0%

Demographic Trends
An increase in the number of higher-paying professions during 2019 equates to a second Population Growth Household Income
consecutive year of strong earnings growth, pushing the metro’s median household 8%
income up 5.4 percent. Improving wages boost the rate of household formation as the

Year-over-Year Change
number of occupied dwellings expands by 17,300 this year, the largest annual total since 6%

at least 2000. The rise in household volume coupled with a strong year for net in-migra-
tion elevates the metro’s population by nearly 30,000 residents. 4%

2%

Supply and Demand Trends 0%

15 16 17 18 19*

2019 Construction Forecast: 632,600 square feet

Supply & Demand Trends
Developers finalize more than 600,000 square feet of space for a second straight year
following a lengthy stretch earlier this cycle when self-storage development was nonexis-
800
tent. At least four projects are slated for delivery during the second half of 2019. 12%
Completions (000s)

2019 Vacancy Forecast: g 50 basis points 600

9%

400
Vacancy in Southeast Florida, including the Miami, Fort Lauderdale, and West Palm 6%

Beach areas, increases to 9.3 percent in 2019 as the region works to absorb new supply. 200
3%

0
0%

Rent Trends
15 16 17 18 19*

2019 Rent Forecast: h 1.6% Rent Trends

Metro United States
Spanning the past seven quarters from June, the metro’s self-storage inventory rose by
more than 1 million square feet. Recent supply additions made filling space increasingly $1.60
difficult for owners and operators, yet the average rent adjusted moderately during the
Rent per Square Foot

$1.20
period, falling 2.3 percent. In 2019, continued deliveries place further pressure on rates,
with the metro’s year-end average falling to $1.25 per square foot. $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.
 $80 2%
15 16 17 18 19*

South
Average Price and Cap Rate Trends South Region Investment Trends
Average Price Cap Rate

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

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

Cap Rate
$60 6%

$40 4% CAPITAL MARKETS

$20 2% By DAVID G. SHILLINGTON, President,
15 16 17 18 19*
Marcus & Millichap Capital Corporation
National Self-Storage • Fed trying to extend economic runway but hitting headwinds. The Federal
Buyer Composition
Reserve’s decisive action, including its rate drop in July, will support the eco-
100%
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 tariffs would be levied, sparking a flight to safety and the recent inversion of
Percent of Total

Private
50%
the 10-year and two-year Treasurys. Though the Fed’s 25-basis-point reduction
REIT/Listed
of the overnight rate and early end to quantitative tightening could pose some
Institutional
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% it will not be seen as an immediate risk. Falling interest rates, a byproduct of
15 16 17 18 19** the trade war and the Fed’s efforts to boost the economy, will bolster leveraged
* Trailing 12 months through June 2019
** Year to date as of Aug. 12 yields for investors by a small degree as lenders also look to widen spreads. With
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.
West Palm Beach Office:
Ryan Nee
First Vice President/Regional 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.