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The self-storage real-estate sub-market on Vancouver Island: past, present and future

The Vancouver Island self-storage commercial real-estate asset class is a strong performer, with a healthy volume of new additions, a stable outlook given the current market, and a future of growth given population projections Island-wide.  William Wright Commercial Real Estate Services 

The self-storage real-estate sub-market on Vancouver Island: past, present and future
William Wright Commercial Real Estate Services
Citified's 'Commercial Real Estate Insight' in partnership with William Wright Commercial Real Estate Services is a monthly series covering regional commercial market activity, market updates and trends.
 
August's segment focuses on the self-storage asset class within Vancouver Island, and explores the market's past performance, the current situation and a future outlook.
 
Past market climate
The self-storage asset class has had one of the biggest increases in interest from real-estate investors over the past 24 months across Canada. This momentum, along with record-low interest rates through early 2022, pushed asset values to new heights within the self-storage market.
 
The assets on Vancouver Island have fared extremely well during Covid-19, with occupancies and rental rates increasing across the board. This was driven not only by the impacts of Covid-19, but also the high population growth Island-wide.  
 
Sales of self-storage facilities have been somewhat limited on Vancouver Island, with two transactions occurring in late 2021, as well as the portfolio sale of Rite Storage which closed in March of 2022, and June’s sale of Van Isle Storage south of Nanaimo. 
 
These transactions indicate that the Vancouver Island storage market is strong with good fundamentals, and is drawing interest from not only local investors but also those from the Lower Mainland and across the country. 
 
Current market
At present, there are no storage facilities being marketed on Vancouver Island.  This is due in part to the tendency of self-storage owners to buy facilities and hold long term, and also the overall smaller number of storage facilities compared to other types of assets.  Additionally, the ownership of storage facilities on Vancouver Island includes larger groups, such as Budget Self Storage, Storage Vault Canada (Sentinel Storage), Adams Storage, U-Lock Storage, and Pacific Rim Storage. These larger groups typically do not sell assets once they have added them to their portfolios. 
 
Future market outlook
On July 13 of this year, the Bank of Canada increased its key interest rate by 1.00% to 2.50%.  The rise pushed commercial lending rates significantly higher compared to the beginning of 2022, dramatically impacting the overall commercial real-estate market as lending costs directly factored into price points realistic for purchasers.
 
This change will have the same impact on the self-storage market. However, the impact may be lessened by what is considered to be an extremely low supply in the sector. Over the short term, this rate increase will make it difficult for purchasers and vendors to come to an agreement on price, as vendors feel their properties are worth valuations of six months ago, while purchasers are dealing with the realities of today’s lending market. Due to this, we expect a fairly quiet summer and fall for transactions. 
 
Future of Vancouver Island storage 
The Island’s storage market is strong and looks to remain that way for the foreseeable future.  The fundamentals for storage on Vancouver Island are in place, with good population growth and a diverse economy to support current and future storage operations and expansion. At present, there are several new storage developments in planning as well as expansions to existing facilities. This points to continued strong performance of the sector despite economic headwinds in the short term.
 
If you are interested in the self-storage asset class, please reach out to Patrick Wood (email) and Connor Braid (email) at William Wright Commercial Victoria, who can help provide you with more detailed market information and off-market opportunities across BC. C
 
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