The Greater Boston self-storage sector has awakened from a decades-long slumber, as real estate investment trusts and other major investors jump into the market and sink millions of dollars into building new facilities and converting old industrial properties into storage depots in the region. 

Across the country, the self-storage industry has seen a similar transformation, with a sector once dominated by independent operators slowly being overtaken by large, institutionalized players such as REITs and companies backed by private equity funds. 

But the Boston area’s self-storage transformation began in earnest only a few years ago compared to other regions of the country, such as the fast-growing Sun Belt and Pacific Northwest, where investors have spent billions over the past decade buying, building and converting properties into self-storage facilities, industry executives say. 

Until recently, the New England market as a whole was considered too expensive and difficult to crack into due to high land costs and notorious zoning restrictions that discouraged investors from entering the market en masse. 

That’s changed in recent years, as larger self-storage players have pushed into the region after a torrid pace of takeovers and new construction elsewhere. They’re now on an acquisition and new-construction tear in the region. 

Supply Skyrockets Across Region 

“Boston is a little late to the game,” said John Chang, a senior vice president and director of research services at real estate brokerage, research and advisory firm Marcus & Millichap. “But the pace of activity is definitely picking up [in the Boston area]. The growth is modest compared to other areas of the country, but it’s growing and changing fast by New England standards.” 

Chang points to recent data showing that self-storage new construction in the Boston area hovered for years at about 300,000 square feet of new space per year. But new construction – which includes ground-up and conversion projects – skyrocketed to 1.5 million square feet of new supply in 2018 and is expected to increase by 1.8 million square feet in 2019, Chang said. 

“The good news for Boston is that the new construction is scattered all across the region, not focusing in one place,” he said. “It’s dispersed out into the suburbs.” 

Marc Boorstein, a principal at MJ Partners Self-Storage Group, a Chicago real estate brokerage and advisory company, agrees that the Boston region used to be considered a “sleepy” market and is a latecomer to the massive changes under way within the self-storage industry. But change has arrived here, he said. 

As of June, total new self-storage construction was up about 5.9 percent nationwide compared to last year, but new construction in the Boston area was up 14.7 percent, Boorstein said, citing recent Yardi Matrix numbers. 

Construction of self-storage facilities hit 1.5 million square feet of new supply in Massachusetts last year. Supply is expected to total 1.8 million square feet in 2019, including a 93,088-square-foot office building conversion planned by U-Haul for a 1960s Framingham office building. Image courtesy of U-Haul.

REITs Get Solid Returns 

Boston’s growth is coming off a smaller base, making its expansion more spectacular looking than it really is compared to other metro markets, Boorstein said. According to some estimates, there are roughly 7.6 square feet of self-storage space per capita across the country, but it’s only about 3.4 square feet per capita in New England. 

Still, Boorstein said major self-storage REITs – such as Extra Space, CubeSmart and Life Storage – are starting to get solid returns in New England, adjusting for the higher costs here, and it’s encouraging investors to jump into the sector. 

Connie Neville, vice president of the Northeast Self-Storage Association and co-chair of the Self-Storage Product Council for SVN in Boston, said mom-and-pop operators are still major players within the self-storage industry, controlling about 50 percent of the market nationwide. 

But she agreed REITs and other large players are quickly changing the business, building bigger self-storage facilities and introducing new innovations, such as sophisticated climate-control systems inside facilities. 

“There’s a lot of money chasing storage,” she said. “The REITs, when they see something they want, can and will pay top dollar for [properties].” 

Some See Risk of Overbuilding 

Because self-storage had been a relatively ignored subsector of commercial real estate until recently, estimates vary about its exact size in Massachusetts, with counts ranging from 300 to 500 self-storage facilities in the state, many of them small, independently owned operations in out-of-the-way places. 

No matter what the count, Burlington-based Stor-U-Self Management Corp. Director of Operations Steve Tranni said he’s concerned that there may be overbuilding today in Massachusetts. Some self-storage operators are starting to offer discounts to renters, forcing down prices and narrowing profit margins for everyone, he said. 

“The market is being overdeveloped,” said Tranni, also a director at the Northeast Self-Storage Association and whose company owns seven facilities in Massachusetts.  

Stor-U-Self itself now  building, on behalf of an unnamed investor, a new, 90,000-square-foot storage facility in Westborough. 

While most attention has focused on the role of REITs and other larger players in the market, changes are also being driven by small entrepreneurs, specifically so-called “valet” self-storage companies, which offer pick-up and delivery services for people wanting to store items.  

Michael Cappelletti, founder of Medford-based Cubiq, said the self-storage market was ripe for change when he founded his company in 2013. Cubiq’s target market: students, young professionals and empty nesters living in smaller apartments and condos and in need of storage. 

Cubiq currently leases storage facilities in Medford, Easton and Pembroke – and it’s definitely looking for more industrial, warehouse or other properties that it can lease for storage. 

“We’re bursting at the seams,” Cappelletti said. “We’re constantly looking for more storage space. Our business is expanding.” 

 Email: jayfitzmedia@gmail.com