Developers have responded to four years of subdued development by completing more than 650,000 square feet of self-storage space in 2018, according to a report from Marcus & Millichap (M&M). This total ranks San Diego as the top Southern California metro for self-storage deliveries this year, driven by larger finalizations in North San Diego, East County and South County.
Expansion of the metro’s storage inventory has increased vacancy for this property type by nearly triple-digit basis points. Still, positive rent growth has occurred for a second straight year, pushing the average rate to $1.55 per square foot, the report states.
San Diego’s quality of life continues to influence relocations and the formation of new households, supporting demand for self-storage units. In 2018, the number of new households will grow by 15,000 while median household earnings advance by 3.2 percent. These factors largely impact suburban retail spending as core consumer sales are heightened by a wave of Downtown multifamily deliveries this year. All of this bodes well for the self-storage sector.
The sector is also buoyed by the fact that San Diego is home to the lowest unemployment rate among Southern California metros following the addition of 20,500 workers in 2017, M&M reports. The leisure and hospitality sector, along with education and health-services-related hiring spearheaded growth. The more diverse distribution of job openings allows overall hiring to inch up this year, as 23,800 positions are added to staffs.
Amid low unemployment, San Diego employers bolstered payrolls by 1.6 percent this year, a rise from the 1.4 percent gain witnessed in 2017. The metro’s population climbed by nearly 18,000 residents following a 0.7 percent uptick in 2017.
Annual delivery volume for self-storage has been notably elevated so far in 2018 as developers finalize 651,000 square feet of space. About 100,000 square feet was completed in 2017.
As construction rises, however, so does vacancy, climbing 90 basis points to 7.9 percent this year. In 2017, an increase of 20 basis points occurred.
The metro’s average rent advances by 2.4 percent following last year’s 3.8 percent bump.