Markets On The Move: Florida

Storage Outlook Bright For Sunshine State

Florida’s self-storage market offers a combination of benefits other states can’t offer, including a decreased unemployment rate and an increase in consumer commerce, paired with a massive influx of individuals migrating to Florida annually. Throughout the economic downturn, Florida has prevailed and the statewide self-storage market didn’t suffer to the extent that other areas in the United States did and are still recuperating from. Thanks to these factors, Florida has emerged a consistently strong market that continues to grow stronger.

Over the past few years, the Florida market has transformed definitively with the population growth throughout the state. In 2010, Florida had an estimated population of 18,801,310, compared to 2015’s estimated population of 20,271,272—a 1,469,962-person increase over five years, or 7.82 percent compared to the national average of 4.10 percent. Florida’s population increase bolstered it into the top five highest change of growth states, equating to roughly 292,992 new residents every year or 1.56 percent.

Residential Development
Further complementing this record-breaking statewide growth is an influx of apartment/multi-family developments. At first glance this may appear unrelated to self-storage, but it goes hand-in-hand with the self-storage sector. In 2015, Florida experienced development of 405,000 apartment units—a seven percent increase over development in 2014. What does this mean for self-storage? The incursion of apartment units demonstrates the effect of bolstering self-storage development in many markets, particularly Florida with its additional 292,992 residents arriving each year.

Demographically, those who rent apartments are also shown to move more frequently than those who own homes. On average, those in apartments tend to move every three years versus a homeowner at roughly every 10 years.

Millennials, in particular, are found to rent apartment units far more often than earlier generations. The National Association of Realtors’ mid-June 2015 report indicated that 60 percent of millennials struggle to obtain mortgages, among other factors that result in opting for an apartment unit over a home. This consistent moving by millennials to apartment units will provide stronger demand for self-storage, even with the increasing supply of self-storage developing throughout Florida. Apartment dwellers account for 12.9 percent of Florida’s residents, notably higher than most states, placing Florida in the top 10 states with the highest apartment share for state population.

The Business Side
Florida is renowned for its business-friendly policies, playing a notable role in its strong self-storage market among other asset markets. Florida’s legislature is well-known for its business climate, including legislative policies, competitive costs, an impressive tax structure, and no state income tax. In comparison to other states with large populations and many strong metropolitan statistical areas (MSAs), land, labor, and capital are more affordable overall. The state is consistently ranked among the top states for doing business because of its economically-positive practices.

Supply Shortage
Florida’s high growth, business-friendly policies, and no state tax status attract investors. With almost 300,000 people moving to Florida annually, its surprisingly fast pace along with the booming market has indicated no measurable supply increase in the past eight to ten years. Case in point: The Villages, Fla., located about 60 miles south of Orlando, was the fastest-growing community in the U.S. from 2012 to 2013 and remains the world’s largest retirement community. The Villages keeps growing, with a population spike of 5.2 percent, adding 5,308 residents between July 2012 and July 2013, and reaching a population of 107,056. However, The Villages’ residents can’t find self-storage space in their area.

Population growth typically spurs demand for self-storage, especially when the supply is limited. However, there’s only about 2.5 square feet of storage space per person in The Villages area, far below the national average of 7.35 square feet per person in 2013. Facility owners within the area state that despite business having dropped off during the recession, it has bounced back as more people move to Central Florida. In fact, many owners have reported that their facilities are completely filled and have a waiting list for openings.

Still, the Florida market has experienced change over the past few years, and there has been a significant increase in general growth that doesn’t seem to be slowing down anytime soon. An improving economy means decreasing unemployment, increasing commerce, and a serious spike in huge multi-family development—a factor that goes hand in hand with self-storage demand.Within the Florida market, continued and new construction is expected to follow through late-2017 and into 2018, which may start to affect self-storage rental growth in markets. As of right now, there aren’t enough facilities to keep up with the demand and the steady annual growth of four to six percent, perhaps a bit less than the past five years.

Of all Florida’s submarkets, South Florida is experiencing the most amount of activity. In addition, there’s an upswing in activity in Melbourne on Florida’s East Coast and Gulf Coast cities such as Tampa and Fort Myers. One of our recent self-storage deals that benefitted from its location within the Florida market involved a three-property, 2,291-unit self-storage portfolio located in the Tampa-St. Petersburg-Clearwater, Fla., MSA, commonly known as the Tampa Bay Area. The total sales price for the portfolio was more than $47 million and offered square footage numbers that one could only dream of within this quickly growing MSA. The strength of the Tampa Bay Area, combined with the lack of supply, made this portfolio highly valuable; there’s a vigorous demand for self-storage properties throughout Florida, but especially for top-quality assets like these in such markets.

There are others too that our group has witnessed firsthand. In 2015, a facility in Hollywood, Fla., was sold at $146 per square-foot, making it highest price per square foot for a single self-storage property in the state at the time. Later in 2015, a Boynton Beach facility toppled this record when it sold later in 2015 at the state’s record-breaking price of $239 per square foot for a single self-storage facility.

Overall, there’s a flurry of self-storage sales activity across the Sunshine State. For many Florida residents, they can’t build them fast enough within this self-storage market.

Michael A. Mele is a Senior Vice President Investments in Marcus & Millichap’s Tampa office, specializing in self-storage. He has closed over 275 self-storage transactions totaling over $1 billion and has achieved Senior Director status in the National Self Storage Group. Mr. Mele has won Marcus & Millichap’s Top Self-Storage Broker four times and earned the coveted Chairman’s Circle of Excellence award. He is prior President and currently serves on the legislative committee for the Florida Self Storage Association.