Investor-driven demand prompts Vancouver to restrict further self-storage development

Only seven years ago, when Patrick Wood started specializing in B.C.’s self-storage real estate market, “no major bank would touch self-storage,” he says.

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Back then, self-storage was still considered a mere “land cover” before the “real development” occurred, “so buyers had to resort to secondary lenders,” to get loans, says Mr. Wood.

“But now, all the major banks like self-storage,” says Mr. Wood, a broker with Vancouver-based William Wright Commercial Real Estate Services.

After proving “recession resistant” during 2008, when some Canadians forced to downsize put their belongings in storage, the asset has delivered strong performances during COVID-19, as people have cleared out space for home offices, classrooms or gyms, says Mr. Wood.

Inflation has also proven no foil for the sector. Unlike residential rent, self-storage rental rates are unregulated, so owners can raise rates to keep pace with demand from residents pushed into smaller homes by soaring borrowing costs.

“Rental rents are at record highs,” Mr. Wood says.

In Vancouver, a unit inside the four-storey NationWide Self Storage is priced at $3.30 a square foot.

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That’s higher than a typical apartment in the same East Vancouver neighbourhood: A 700-square-foot apartment priced at that square footage would cost $2,310 a month.

As CBRE’s Clive Bradley puts it, self-storage has become “a hot commodity” during the past three years.

Mr. Bradley, head of CBRE’s self-storage practice group for Canada, says he is seeing “growing interest” from both individual investors and large public and private real estate investment trusts in Canada.