01 14iss canadian report s.ashx

Trends in Canadian Self-Storage: A Look at Real Estate, Facility

Operation and MarketingCanada’s self-storage market continues to evolve, with demand on the rise in many parts

of the country. Although facility operators and developers continue to face a number of challenges, they’re tapping into creative solutions to build new properties, expand

existing ones and meet consumer demand.

S P E C I A L R E P O R T

January 2014 US$39.00

BUSINESS SOLUTIONS

Inside Self-Storage • Trends in Canadian Self-Storage 2014 2 insideselfstorage.com

Table of ContentsSECTION 1

An Overview of Self Storage Real Estate Trends in Western Canada ..............................................................3

SECTION 2Overcoming Developmental Hurdles in Canada .......................9

SECTION 3Curing the Canada Market’s ‘Discount Disease’ .................... 12

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The supply at of the end of 2013 in the Vancouver Central Metropolitan Area (CMA) was estimated at 6.1 million square feet or 2.33 square feet per capita.

An Overview of Self-Storage Real Estate Trends in Western CanadaBy Candace Watson

The Canadian self-storage market continues to fight a bevy of challenges including lack of new construction, an inability to raise rents in most regions, and longer lease-up periods. This article takes a closer look at the real estate market in Western Canada, examining supply and demand, rental and occupancy rates, acquisitions, and new construction.

BRITISH COLUMBIA: Vancouver Lower MainlandThe Vancouver Lower Mainland has had five years of very

limited additions to supply. From 2009 to 2013, less than 100,000 square feet was added to the self-storage inventory, comprising one new facility each year as well as expansions to existing sites. Additions were particularly low in 2013 when there was only an expansion to an existing facility and no new projects were completed.

In the previous five years, an average of 5.5 new facilities were developed annually. There are a number of new proposals that have been approved and may be completed in 2014, including three new facilities ranging in size from 60,000 to 90,000 square feet in Burnaby, South Surrey and Vancouver, and two expansions to existing facilities in Langley and New Westminster. If all these developments are completed, approximately 280,000 square feet will be added to the supply.

The supply at of the end of 2013 in the Vancouver Central Metropolitan Area (CMA) was estimated at 6.1 million square feet or 2.33 square feet per capita. There are an estimated 106 facilities, with the average facility of 56,484 square feet. If all projects are completed that have been approved for development, the supply at of the end of 2014 will be 6.38 million square feet or 2.4 square feet per capita.


Although the overall supply is estimated at 2.33 square feet per capita, the range of supply is less than 2 square feet per capita in Burnaby/New Westminster, Delta and Pitt, and Meadows/Maple Ridge/Mission, to more than 3 square feet per capita on the North Shore and Langley.

Occupancies vary according to supply, the leasing status of new or newly expanded facilities, and demographic factors. Newer facilities are requiring longer lease-up periods, especially larger facilities of more than 85,000 square feet. In the 100,000-square-foot-plus category, the newer facilities developed in one phase are requiring more than five years to reach stabilization, now considered to be 80 percent for a property of this size. There are at least two examples of facilities “flat lining” in the middle of a five- to seven-year lease-up period in the 60 percent to 70 percent range and remaining flat for two to three years.

With respect to rents, the general range in the urban areas of the Lower Mainland is from $1.79 to $3.39 per square foot per month; $1.43 to $2.02 per square foot in suburban markets; and $1.56 to $1.70 per square foot in the two most recent rural facilities surveyed. In general, there appears to have been a small increase in rents in 2013 over 2012, but these have been less than 3 percent overall. Facilities in leaseup are not raising rents.

The most recent sales in the Lower Mainland took place in 2012 and include the sale of a small conversion in the City of Vancouver that sold at an estimated cap rate of 6.3 percent based on stabilized net income at the time of sale ($206 per square foot of net rental area, or NRA) as well as the sale of a three-property portfolio. Two of the properties were well-established and stabilized; the third was still in leaseup. The mature properties sold for cap rates in the 6 percent to 6.5 percent range ($173 and $215 per square foot of NRA).


BRITISH COLUMBIA: Capital Regional DistrictThe Capital Regional District (Victoria), or CRD, has a much smaller population and a

lower supply of self-storage at an estimated 1.9 square feet per capita. There are 20 facilities in the CMA (excluding Sooke), with an average size of just over 33,000 square feet. There has been no new development since 2009 and no expansions of existing developments. One conversion facility of approximately 21,000 square feet was removed from the inventory to make way for new development.

There is currently a proposal to convert a portion of an existing industrial building in Saanich to self-storage. It will be developed in phases, adding about 54,000 square feet to the inventory in the first phase and another 22,000 square feet to the supply in the second phase.

Canadian Self-Storage Valuation Services Inc. (CSSVS), which offers appraisals and feasibility analyses to owners and developers in Canada, surveyed the CRD in August 2013, and occupancies were estimated at 89 percent. The trade area is significantly influenced by the University of Victoria, with occupancies much higher in the summer months.

Several of the suburban properties were found to have soft occupancy by comparison (low to mid 80s) to the inner-city facilities, which had generally very high occupancy at the time of survey (95 percent plus). Four of the facilities (in Saanich and Central Saanich) had not raised rents in four years, and several suburban facilities were offering unit-specific specials. The overall average rents in the trade area range from $1.58 to $1.63 per square foot per month for facilities with average unit sizes of 101 to 115 square feet; $1.77 to $1.95 per square foot for properties with units averaging 64 to 93 square feet; and $2.33 to $2.64 per square foot for sites with average unit sizes of 44 to 56 square feet.

There was a sale of a conversion facility in the Esquimalt area of the CRD in January 2013. The property was not formally listed and sold in the 6.5 percent to 7.5 percent range to the owners of a CRD portfolio ($130 per square feet of NRA). There is a pending share sale of a self-storage in the CRD, which, when completed, will indicate an overall rate of return in the range of 7.6 percent based on stabilized net income.

BRITISH COLUMBIA: Nanaimo Regional DistrictNanaimo is developed with 15 self-storage facilities with a total area just under

450,000 square feet and an average size of 29,500 square feet. The most recent addition was in April 2010 when a 90,000-square-foot, two-story facility was developed on Island Highway. This property is still in leaseup. The supply in Nanaimo is approximately five square feet per capita, but because of the regional importance of Nanaimo as a retail and commercial center, its trading area is believed to be larger than the bounds of the city itself.


The most recent sales in the Nanaimo Regional District (NRD) took place in 2010 and 2011. The more recent sale was in Courtenay and reflected a cap rate of 6.7 percent based on stabilized net income and an adjustment for excess land value ($123 per square foot of NRA). The 2010 sales reflected cap rates of $6.7 percent ($99 per square foot of NRA) and 7.2 percent ($96 per square feet of NRA).

The other sales in British Columbia have been in the interior of the province and comprise smaller facilities, less than 20,000 square feet. Cap rates have been in the range of 6.7 percent (2013 sale) and 7.9 percent (2012 sale).

ALBERTA: Edmonton Edmonton has an estimated supply of self-storage of 2.5 square feet per capita in 47

facilities. The most recent addition to the supply is a three-story, class-A facility in the Ellerslie area, which is situated adjacent to another newer multi-story facility. When the market was surveyed in early 2013, occupancies estimated in the low to mid 80s. Later in the spring, occupancies were estimated higher, with some south-end facilities reporting no units available. Recent reports confirm occupancies on average in the last year in the low 80s. Rents for an unheated 10-by-10 unit in Edmonton ranges from $135 to $230 per month.

The most recent sales in Western Canada have been in Edmonton, including a sale of a 44,000-square-foot facility in the Winterburn area. Constructed in 2005 with significant expansion potential, the facility sold in February 2013 at a 6.5 percent cap rate based on estimated stabilized net income. Economic occupancy was low at the time of sale (55.5 percent). Physical occupancy was 70.4 percent, and the purchaser

Canada Self-Storage At-a-Glance

Region Number of Facilities

Total Supply (SF)

Supply per Capita (SF)

Average Occupancy

British ColumbiaCapital Regional District (Excluding Sooke) 20 661,000 1.9 89%Nanaimo Regional District 15 450,000 5.0 NAVancouver Central Metropolitan Area 106 6,100,000 2.3 85-90%AlbertaCalgary NA 2,760,000 2.3-2.5 90-95%Edmonton 47 2,340,000 2.5 80-85%Grande Prairie 10 384,000 5.1 94%Red Deer NA NA NA 78-80%SaskatchewanRegina 10 320,000 1.5 NASaskatoon 18 436,000 1.8 80-82%Source: Canadian Self-Storage Valuation Services Inc.


reported that by April 2013 occupancy was at 85 percent. The price per square foot of net rentable area was $110. The average overall rent per square foot per month at the time of sale was $1.10 (average unit size of 166 square feet).

A 64,000-square-foot, well-established facility on St. Albert Trail sold in late 2012 for an estimated overall rate of return of 7.3 percent, according to the purchaser. The indicated price per square foot of NRA was $132. The average overall rent per square foot per month at the time of sale was $1.32 (average unit size of 146 square feet).

ALBERTA: CalgaryThe estimated supply of self-storage per capita in Calgary is 2.3 to 2.5 square feet.

One of the most recent additions to the supply is a large multi-story facility in the south end of the city, which was substantially finished in 2011. Leaseup has been slow, reportedly at less than 1 percent per month. Rents in Calgary for a 10-by-10 unit range from $176 to $327 per month.

Occupancies were unusually high in 2013 due to the extensive flooding in June. For the rest of the year, most facilities were reporting occupancies in the 90 percent to 95 percent range. However, by November occupancies were beginning to decrease and it will require another cycle to gauge whether the flood will have a long-term effect on self-storage occupancy. In the year prior to the flood, occupancies were reported in the 85 percent to 90 percent range.

There is a new facility of approximately 80,000 square feet under construction in the northwest quadrant of the city. Construction has been slowed by site issues, as the property has a steep slope. The new development is very close to a facility that has the highest rents in the city.

The most recent sale in Calgary took place in early 2012 (negotiated in late 2011) at a reported capitalization rate of just under 7 percent. The facility has a net rentable area of 34,000 square feet and the sale price reflected a value per square foot of NRA of $88. The site has good exposure, but the facility was constructed in 1982.

ALBERTA: Red Deer Red Deer has been slow to recover from the economic recession and the slump in

natural-gas prices. Self-storage occupancies are reported in the 78 percent to 80 percent range, and the newest facility, opened in the summer of 2007 and well-located on Highway 2, has not yet stabilized. There is a recently reported sale of a facility in the Red Deer area comprising predominantly outside storage for RVs. The overall rate of return on the stabilized net income after adjustments for the value of the substantial residence on the property is below 7 percent.


ALBERTA: Grande PrairieThe Grande Prairie trade area was surveyed in the summer of 2013. The overall

supply is estimated at 384,000 square feet in 10 facilities, or 5.1 square feet per capita. The overall occupancy at the time of survey was estimated at 93.9 percent (4.8 square feet per capita).

Recent reports confirm the high occupancy is continuing, however, 80 percent of the budget for snow removal has already been spent. The range of overall rents per square foot based on the facilities for which we have actual unit mixes is $1.14 to $1.61, with average unit sizes at each end of the range being 100 to 157 square feet. Rents at the time of survey for a 10-by-10 unit ranged from $108 to $179 per month.

SASKATCHEWAN: SaskatoonSaskatoon is developed with 18 self-storage facilities, an estimated 436,000 square

feet or approximately 1.8 square feet per capita. Currently rents for an unheated 10-by-10 unit range from $110 to $150 per month.

SASKATCHEWAN: ReginaRegina was surveyed in 2012. At that time, it was developed with 320,000 square

feet of self-storage in 10 facilities, representing 1.50 square feet per capita.Although there has been little to no new construction in the Canadian self-storage

industry, there has been a handful of real estate transactions over the past few years. This bodes well for the industry, as it indicates self-storage is still being sought as a good investment. In addition, some operators have been able to hold their rents steady, while others have seen small increases. Overall, the Canadian self-storage market is experiencing numerous growing pains, but indicators show it will overcome them and continue to be a robust investment.

Candace Watson is the principal of Canadian Self-Storage Valuation Services Inc., which

offers appraisals and feasibility analyses to owners and developers in Canada. She has

more than 30 years of experience as a professional appraiser and has appraised more than

40 percent of the current supply in the Lower Mainland. To reach her, call 604.681.2929;

e-mail [email protected].

mailto:cssvs%40shaw.ca?subject=


Overcoming Development Hurdles in Canada

By Molly Bilker

The Canadian self-storage market is handicapped by limitations on development.

Saturated markets mean higher land costs. Building codes and guidelines are stricter

than those in other countries and can cause costly changes in development plans.

Despite such setbacks, the market continues to expand, and self-storage is finding a footing in rural areas and small towns where it was once unknown. In addition, rental rates are gradually increasing and demand is picking up, says Marc Goodin, a civil engineer and owner of Caraquet & RV Storage in Caraquet, New Brunswick, Canada.

The Rising Cost of BuildingThough the Canadian self-storage market regularly sees new development and an

increase in renters, builders face a number of challenges. In some areas, land prices are rising because the markets are flooded, explains Jamie Lindau, sales manager for Trachte Building Systems, a U.S.-based developer that works regularly with Canadian facility owners and investors.

Inflating land prices raise the break-even analysis, which includes the combined costs of development and land, and returns become more unstable. As such, more money is needed for the down payment, Lindau says. “The availability of money is there, but you need a lot of capital yourself to get into the business.”

Rigid development guidelines also inflate building costs. Development is guided by building codes, which can vary greatly depending on the region. For example, there’s a requirement in Saskatchewan that firewalls must be added between all units or sprinklers should be added inside the building. For this reason, Lindau says, most developments in the region are all single-story to scale back on the expenditures. “The cost to develop is a lot higher, but also, the rental rates are higher,” Lindau notes. “The cost is easily 30 percent more [to build] than in the United States.”

In British Columbia, however, development costs have dropped. Prices are alleviated by the province’s abandonment last April of the harmonized sales tax. Now that the tax has been rescinded, storage rents are once again exempt from the 7 percent sales tax, which is still in effect in Labrador, New Brunswick, Newfoundland and Nova Scotia.


Migration Continues The migration of residents about the country for personal or professional reasons also spurs

new development. Saskatchewan’s government and business practices have transformed in light of the province’s oil-shale boom in recent years, which has caused more people to move there. With more people comes higher storage demand. “Where the people are moving to is where it looks like there’s opportunity for development,” Lindau says. “The Maritime Provinces might be closer to saturation, or areas like large cities in Ontario might be overdeveloped. Not everywhere is a great place to build. You have to check it out.”

Other trends have begun to emerge. More developers are building climate-controlled units with radiant floor heat to keep them warm during the frigid Canadian winter. Multi-story facilities and conversion projects are becoming a trend in large cities, where self-storage operations are concentrated as well.

Smaller towns are also starting to develop self-storage. “Canada is starting to catch up with the U.S.,” Goodin says. Nonetheless, people in rural areas still don’t know enough about the values and uses of self-storage, according to Goodin, and operators and developers will need to continue to educate them through marketing efforts.

Source: 2012 Self-Storage Almanac

Marketing Is Key Technology has had an impact on the Canadian market, where proximity to the

population and an Internet presence are beginning to outweigh the advertising power of street visibility. Goodin stresses that the Internet is a critical part of being a market leader and successful self-storage operator. His facility’s website offers an overview of the business, and customers can rent a unit online. Goodin also maintains a Facebook page and participates on Pinterest.

The potential customer’s ability to search for self-storage via GPS and mobile devices allows him to find out which facility is closest to him, making closeness to a high-density area more important to operators than conventional marketing, Lindau says. Community marketing is also critical to bringing in new renters. Caraquet & RV Storage visits local businesses and participates in local events. This helps the company get in touch with residents who may need storage solutions.

Type Number of Traditional Units Number of Boat/RV UnitsUrban 463 21Suburban 549 16Rural 230 165

Average Facility Size


There are more than 3,000 self-storage facilities in Canada.

In fact, many Canadian self-storage operators are reaching out to their communit ies by participating in events, donating money or offering local charities the free use of a storage unit. This spring StorageMart properties in A lbe r t a , B r i t i sh Co lumb ia , On ta r i o and Saskatchewan acted as donation centers for the nonprofit organization Skate to Great. This summer, Apple Self Storage held a “Meat & Greet” event for the Kingston Interval House for Women and Children in Crisis in Kingston, Ontario. All Canadian Self Storage hosted an event featuring a speech from the Canadian Prime Minister, and Vanguard Self Storage sponsored a car race at the Peterborough Speedway in April.

Community and customer connections may be the most important part of self-storage success in Canada. “There’s much hype on new trends, but a bas ic , qual i ty fac i l i ty, great customer service and wowing the customers are still the key to success,” Goodin says.

Source: Self Storage Association

Molly Bilker is a sophomore journalism major at Arizona State University (ASU) in Phoenix.

She is part of ASU’s Barrett, the Honors College, and is completing a minor in Spanish. She

comes from an arts-focused middle and high school with a creative-writing background. She

actively participates in the arts, including creative writing, guitar and vocal music, theater,

photography, ballroom dance, drawing, and film. To reach her, e-mail [email protected].

mailto:mbilker%40vpico.com?subject=


Curing the Canada Market’s ‘Discount Disease’

By Molly Bilker

Canadian self-storage is an odd body. It seems pretty healthy from the outside. The

heart of the market is still pumping in customers to keep facilities healthy. Growth is

steady. Renovations and additions to existing facilities are regular. But there’s a worrisome

microbe in the bloodstream—what Canadian Self Storage Association Director Robert

Madsen calls “the discount disease.”

While self-storage demand is strong, discounting rental rates is a common practice among operators, Madsen says. It’s decaying profit and keeping the body that is Canadian self-storage from being its healthiest.

The cure comes in the form of marketing. Competitiveness on the Internet reduces the need for lowering costs to bring in more customers, says Hal Spradling, general manager and operating partner of Toronto-based All Canadian Self Storage. Besides, discounting may not even work as well as it seems.

“It’s extremely unlikely these concessions really change anything in the distribution of storage demand,” Madsen says. “Self-storage is not a product you can increase market demand just by a price decrease.”

A Heart Pumping Steady DemandWhile self-storage demand isn’t growing rapidly in Canada, it also isn’t falling, which

Madsen says is a pretty good sign. Occupancies are holding steady or improving slightly. “This will give operators great confidence to hold their rates and even work to improve them to cover some of the rising expenses we’ve experienced over the years,” he adds.

Many operators expect to raise rates in 2014, now that occupancy and rental rates are picking up, says Marc Goodin, a civil engineer and owner of Caraquet & RV Storage in Caraquet, New Brunswick, Canada. “After several slow years, the rentals and rental rates are increasing,” he says. A large amount of sites should start increasing rents modestly in the coming year, Madsen agrees.

With consistent demand, many operators have renovations and additions planned for the upcoming year. Vanguard Self Storage will add four buildings to the current six at its site in Peterborough, Ontario, a plan the company was always intending to carry out and chose to do in 2014 because demand was steady enough, says site manager Mark Blodgett.

Likewise, All Canadian Self Storage will add roughly 500 units to one facility and build another in Toronto, Spradling says. Apple Self Storage in Aurora, Ontario, has two expansions and a couple sites in early-stage development, says company president Phil Allan.


Roughly 80 percent to 85 percent of all self-storage facilities are owned by independent operators.

Madsen points out that while many existing facilities are being expanded, development of new facilities is much more difficult. “We see a lot of new activity brewing in the industry as existing facilities look to expand,” he says. “New developments often see problems in high land and construction costs.”

The Discount DiseaseDiscounting is prevalent throughout the Canadian self-storage industry. Apple Self

Storage has no plans for increasing rents in the coming months because competition in the area is adding downward pressure on prices. “Everything is just going to keep pushing it down,” Allan says. “We’ve got a lot of our competitors giving away free months and free this and free that.”

But discounting only causes operators to lose money in the long run, Spradling says. “If they just figure out how much discount they’re doing, how much that’s costing them a year, take half of that money and put it in intelligent advertising, they could quit discounting and they’d have more money, more occupancy and better business.”

Bet te r adver t i s ing and marketing will rid operators of the need to discount, he continues. “The thinking being, ‘Oh, if I discount it, I won’t get as much money, but I’ll sell more.’ And that’s a huge fallacy, because to sell more, you have to advertise and expose your product more. Just because you’re the lowest guy on the block doesn’t mean more people will come to you. They have to know you’re the lowest guy on the block.”

Another way to minimize losses from discounting is to get creative, Allan advises. He suggests using prepayments such as giving a customer a 10 percent discount if he pays 12 months in advance. This way, the commitment is made and the customer is paid for the full year. “Depending on how you discount, if somebody walks in and wants the price on a 10-by-10 and you just reduce the price, that’s one thing,” he says. “And that has been happening. But pretty soon, that has to quit happening, because the prices are getting jumped on.”

While some operators say rent concessions are “winding down,” others, believe it’s rampant. “This is a fact of self-storage life and will become more so as operators become more focused on revenue management,” says Mike Burnam, CEO of Columbia, Mo.-based StorageMart, which operates 135 facilities in Canada and the United States.

Source: Canada Self Storage Association


A Cure? The Digital WorldThe health of the Canadian self-storage market hangs in the hands of the Internet,

according to Spradling. “The powers of the Web and website electronic advertising—marketing—are definitely becoming more important every day,” he says. Social media such as Facebook and Twitter are becoming ever more prevalent, while search engines like Google require attentive search engine optimization as part of the marketing.

Residential

Commercial

Military

Students

62.46%25.15%

7.26%

5.13%

Self-Storage Customer Base in Canada

Source: 2012 Self-Storage Almanac

Without a handle on technology, discounting (and losing profit), may be the only answer, Spradling says. “Most people aren’t concentrating on Google and reviews, and on being on the first page. They don’t really know how to get there,” he says. “They don’t know anything about it. So those people, in order to capture the market they’re losing, are going into discounting.”

Many companies have a number of ideas for how to get involved with technology. Goodin says he uses Facebook and Pinterest, as well as offering customers the ability to research and reserve a unit online.

Blodgett plans to use more technology in 2014. “[We want to] look at new and different venues for advertising such as radio ads, electronic billboards and social media advertising,” he says.


It’s important operators invest the time and energy in using and understanding new technology when using it as an advertising tool. “How do we stay right up on the leading edge of developing value through technology?” Allan asks. “We invest in it. We invest in people and technologies to try to make it better, constantly.”

Technology is rapidly defining and changing the Canadian self-storage market. Though demand may be steady, the playing field has changed. Even smaller operators can now compete with larger chains online, if they do it right. “Get better with the Internet,” Allan advises. “Get better with that world, because that’s where the generation has moved very, very quickly. The markets have moved dramatically in the last 12 to 18 months. They’re not recognizable from where they were two years ago.”

Molly Bilker is a sophomore journalism major at Arizona State University (ASU) in Phoenix. She

is part of ASU’s Barrett, the Honors College, and is completing a minor in Spanish. She comes

from an arts-focused middle and high school with a creative-writing background. She actively

participates in the arts, including creative writing, guitar and vocal music, theater,

photography, ballroom dance, drawing, and film. To reach her, e-mail [email protected].

mailto:mbilker%40vpico.com?subject=

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