Notable deals and a sizable development pipeline indicate a robust self-storage market in Western Canada, where migration, density and business users are driving demand.
Nearly four million square feet of new supply is expected in B.C. and Alberta together between now and 2028, said Antonio Balogh, national market intelligence lead with commercial real estate services firm Avison Young (Canada) Inc.
New supply in B.C. represents 26 per cent of national self-storage construction, and in Alberta it represents 15 per cent, in both cases topping their existing market share in Canada, he said in a statement.
“Today, we are seeing multiple demand drivers cementing a compelling long-term investment strategy for self-storage real estate, especially in Western Canada,” he said.
Recent deals have included QuadReal Property Group LP’s purchase of Maple Leaf Self Storage Inc.’s 15-facility portfolio in B.C. and Alberta, a deal disclosed in May and estimated at close to $1 billion.
U.S.-based SmartStop Self Storage REIT Inc. has also been an active player in Western Canada, acquiring a 74,000-square-foot facility in Kelowna in April for US$29.1 million and backing Strategic Storage Growth Trust III Inc.’s acquisition of a 52,500-square-foot East Vancouver facility in June for more than $35 million.
SmartStop also recently acquired five properties in Alberta from Bluebird Self Storage, which made its own purchase of a newly built facility in Victoria in March for $26.7 million.
“People need places to store things as the population grows and as the inventory of housing grows,” said Kirk Kuester, executive managing director in the Vancouver office of commercial brokerage Colliers Canada, which was involved in the East Vancouver deal.
“Units are smaller and people are getting by with way smaller spaces to live in and way fewer storage options within their places,” he said.
Self-storage is tied not just to migration and smaller housing, but also to warehouse availability.
“We’ve seen a pretty large increase in commercial users of storage, especially in major metropolitan cores, because there’s a distinct lack of warehouse space,” said Patrick Wood, a partner with Victoria-based brokerage JBW Commercial Inc.
Some retailers rent storage units for the months leading up to Christmas and then vacate them after the holiday season, he said. Meanwhile, some Fraser Valley companies are re-supplying their technicians who work in downtown Vancouver from nearby storage units, reducing travel time.
“It’s a cost-saving thing. Because a lot of self-storage facilities are pretty well located, it really brings efficiencies to a lot of businesses,” Wood said.
Avison Young’s Balogh said the adequacy of self-storage supply is based on the square footage of rentable storage space per capita. Ontario and B.C. lead the way at 32 and 31 square feet per capita, respectively. Alberta’s supply is relatively tighter at 25 square feet per capita, while Manitoba and Saskatchewan are below 15 square feet per capita, he said.
“While new supply in Manitoba and Saskatchewan is more muted up to this point, the tight existing supply per capita creates potential for a quick spark,” he said.
Those interested in entering the storage industry may see slightly higher cap rates “mostly because storage is an operating business,” JBW’s Wood said.
Rental rate growth has stabilized to around 3 to 4 per cent a year, after big increases during the pandemic, he said.
Yet self-storage requires “very active” management due to short-term leasing and the need for constant marketing, Wood added.
Self-storage is an active, alternative asset class similar to student housing, senior housing and data centres, said Colliers’ Kuester.
“They appeal to a unique investor, and it’s an investor that quite often is very focused strategically on alternatives,” he said.
