In order to value a self-storage facility for buyers and sellers, it’s essential to have an objective way to measure the value of a facility.
Self-storage facilities are complicated investments, made up of land and buildings and an ongoing business with clients and goodwill. It’s difficult to compare differing facilities across geographical areas. In valuing a facility, consideration must be paid to different levels of occupancy and different amounts of empty or vacant space. Some facilities have extensive hardstand or adjoining unimproved land, and their location will be better or worse than other comparable facilities. There may be addition income generated from the sale of merchandise like packing materials, or solar panel rental or even on-site signage. This is in addition to a differing cost structure, which might include wages, franchisee costs and offset costs such as solar rebates etc.
Nevertheless, a comparison is required in order to establish a likely selling price or value for interested parties such as prospective buyers and sellers of self-storage facilities, as well as financiers and insurance companies.
A ‘cap’ rates, or capitalisation rate, is a figure used to calculate the expected value of a self-storage facility. Cap rates are also known as yields.
Cap rates are expressed as a percentage and are a guide to the income generated on the capital invested.