DIY versus Brand

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While the U.S. commercial real estate market has recovered nicely in all major sectors since the latest recession, two distinctly different property types stand out as desirable in the eyes of investors.

DIY: Self Storage

  • Relatively low dollar barrier for entry in acquisition or development (prime sites and expensive construction not required).

  • Maintenance and administration are not complex, making establishment of operational policies easy to follow and monitor.

  • Bolt together design allowing ready alteration/expansion to match market changes and value-add improvements (HVAC, electronic payments, and entry systems can be phased in as occupancy stabilizes).

  • Recession resistant product and service; strong economic change either way means household change, generating personal storage needs.

Growing demand has helped this industry. Check out the following summary of national self storage average rental rates and occupancy rates...

2011 avg. rent/sf @ $1.09 psf 2011 avg. occupancy @ 82.1%

2017 avg. rent/sf @ $1.26 psf 2017 avg. occupancy @ 92.8%

It’s easy to see why this product attracts the energetic and self reliant investor.

Brand: Lodging

  • Aggressive brand market share expansion offers attractive development and ownership terms, including entry investment requirements and assistance in site selection.

  • Brand led management training and reservation systems smooth the new investor’s successful transition into the hotel business.

  • Despite claims to the contrary, the mid-quality component of the lodging industry has evolved (devolved?) into uniformity “just what works at the lowest cost” shedding not only individuality but also risk, as consumer expectations have been lowered.

  • Occupancy and rental rate growth have been significant since the recession, inviting many to take advantage of the aforementioned branding assistance, yet this industry is decidedly NOT recession resistant!

Growing demand has sustained this industry in the past few years, fueling brand-led assistance to entry. National lodging average daily rates (ADRs) and occupancy rates are summarized...

2011 avg. daily rate @ $101.70 2011 avg. occupancy @ 60%

2017 avg. daily rate @ $126.54 2017 avg. occupancy @ 66%

A push into mediocrity?