Rent Growth and New Development Slows in Montana
by Claire Matten, Sterling CRE Advisors
The 2018 year-end trend of plateauing rents and rate declines in larger metropolitan areas has finally started to infiltrate the Montana self-storage market. A recent study has shown that the Missoula market has been one of the only markets in Montana to post positive rent growth in Q2 2019 while the Bitterroot Valley shows very little to flat rent acceleration. Markets such as Bozeman, Billings, and the Flathead Valley all posted negative rent growth figures, albeit the decline was less than 1% in each of these markets.
The slowing rent growth is likely due to an influx of new storage development in recent years. However, Montana self-storage operators have traditionally been more hesitant to implement dramatic rent increases compared to more bullish operators in larger markets. Since the overall occupancy rates are still reporting over 90% for many facilities in Montana, some of the slow rent growth could be attributed to more conservative operating strategies with an overall goal of retaining high occupancy rate rather than focusing more heavily on economic efficiency.
Owners and investors have been watching the self-storage development trends closely in recent months among whispers of overbuilding and market saturation. Land and construction costs have placed additional restraints on the feasibility of new development in Montana and in many places throughout the country. A new noteworthy development project in Spokane, Washington is the conversion of the 115,992 square foot former K-Mart building into 700 indoor climate controlled units with upgraded security features. There are no new developments permitted in Missoula County and new development across the state appears to have cooled as of Q2 2019. (Click on the image at right to download FULL REPORT)
Where are the Opportunities?
Acquisition opportunities still exist in neighborhoods ramping up for ample residential development. Areas with increasing employment opportunities are also a good place to look for an opportunity to enter the market.
Snapshot: Asking Rents Across The State
If you are a self-storage facility owner and would like a complete market study for your development(s) including demographics, aerial photographs, and rent studies, please reach out to Sterling CRE Advisors for a full evaluation. If you have interest in acquiring self-storage facilities or adding to your portfolio, please contact us to explore the current opportunities available that may meet your investment requirements. Email us today!