Q&A With Paul Fiorilla of Yardi Matrix

Paul Fiorilla is director of research for Yardi Matrix, the data division of Yardi Systems. Matrix is a leading data provider in the multifamily and self-storage sectors, with databases in single-family rentals, student housing and RV/boat storage. Paul oversees publications of a wide range of thought leadership articles, national and metro outlooks, monthly national rent reports and bulletins about capital markets trends in the multifamily, self-storage, office and industrial property types. He also serves as a volunteer editor-in-chief for CRE Finance World magazine, which is published by trade group CRE Finance Council; is on the research and publications committees at the Pension Real Estate Association; and is a member of the research committee at the National Council of Real Estate Investment Fiduciaries.

Paul has more than 26 years of experience as a high-profile writer and researcher in commercial real estate and capital markets. Before joining Yardi in 2015, he was an investment vice president in the research group of Prudential Real Estate Investors (now PGIM), and wrote for Commercial Mortgage Alert covering real estate capital markets, CMBS, and industry trends and players. 

Toy Storage Nation is appreciative to tap into Paul’s wealth of knowledge of the RV and boat storage industry and well beyond. 

The storage industry had a bit of a hey-day during the pandemic. Now that the world is returning to a “normal” state of being, where is self-storage landing? 

Self-storage demand and street rates were boosted significantly during the pandemic. Average street rates increased by more than 15% in 2021 through the fall of 2022 as occupancy rates rose. In recent months street rates have started to level of or decline in most markets while normal seasonality growth returns. 

What we are seeing is that operators are focusing income growth on existing customers. Many are pushing rates and allowing occupancy rates to fall to historical levels. Demand remains strong though not as bullish as it was during the pandemic, when migration was soaring, and households were using self-storage to support new home offices. We expect moderate growth in demand and property income in the spring/summer leasing season this year. While the economy currently remains strong, there are concerns about the impact of possible recession in the second half of the year.

Can you provide a read on where RV and boat storage has been and where it’s heading?

RV/boat storage is a niche sector with much potential growth that remains limited by a lack of institutional capital. Yardi Matrix tracks more than 1,000 RV/boat facilities across the country. Those in operation have strong demand from the growth in recreational vehicle sales and the need for storage of these vehicles as they cannot be stored in many residential areas.

While demand is strong, there is very little new supply and in some areas facilities are being taken out by industrial developments. The vast majority of RV/boat facilities are mom-and-pop operations, in our opinion there is a need for institutional capital sources that have the capacity to build in bulk, especially in-demand climate-controlled facilities, and develop standard operational practices. 

This type of institutionalization is akin to how the self-storage sector developed, though RV/boat is a small segment and institutionalization remains in the early stages.

It seems local planning and zoning commissions have a bit of a chokehold on RV and boat storage development in some markets. In your experience, is this typical of emerging real estate commodities? 

Yes and no. Newer, lesser-known property types often face some discrimination from local planners because they are unfamiliar and long-term demand is less certain. Some planners currently prefer property types such as industrial or residential that are more established or bring in more tax revenue. RV/boat storage facilities typically are located outside city centers near the edge of suburban areas where people can pick up RVs or boats and drive to camping grounds at parks or lakes.

However, there are also generic considerations that impact acceptance of any property segment, such as whether it fits with the municipal master plan and zoning regulations, blends with other properties in the neighborhood and the impact on taxes, traffic and services.

How important is it for developers/investors to understand data analytics? 

We think this is very critical. Data/analytics provides the basic research about demand, the performance of competition, the status of new developments and income potential. Without a thorough analysis of these and other factors, developers/investors are basically flying blind. The increased use of data analytics has been a sea change in the commercial real estate industry in recent decades in preventing overbuilding and professionalizing property management. 

Do you have any insights on what markets are red hot and what will be the next tier? Any idea if specific markets are nearing saturation?

Given the under-development of the RV/boat segment, there is demand in many markets across the country. We are not aware of any market that is over-saturated and in some markets near population centers properties some are being taken offline as they are being acquired to convert to industrial properties.

In general, though, markets with longstanding demand for RV/boats are areas within driving distance of national parks such as Denver, Texas and Northern California, or waterfront activities such as Florida or the upper Midwest.

For those entering the RV and boat-storage industry, is there a trend in traditional self-storage operators expanding into vehicle storage vs. entrepreneurs taking their first punch with vehicle storage exclusively?

This is decidedly a mix, some properties are RV/boat only but others have RV/boat sections of larger self-storage facilities. The fact that RV/boat facilities tend to be mom-and-pop oriented is one of the reasons we believe there is a need for institutional capital and some standardization in the segment.

Do you have any words of wisdom for developers and/or investors regarding the industry? How about tips for accelerating success? 

There’s no shortage of demand for RV/boat storage. Some 6 million RVs and millions of motorboats are registered in the U.S., and the number grows each year without a corresponding growth in storage capacity. Our advice is to find the locations where demand will remain strong, including: 1) markets where demand will remain steady over the years because of the proximity to parks/water activities or 2) high-population markets with less demand but extremely limited supply where more RV/boat storage facilities are needed.

We would also encourage investors to think big – as we have said, the sector is dominated by small owners. As much as anything else the market needs standardization in facilities and operational practices that would come with long-term institutional capital and/or branding.

For more information on Yardi Matrix, visit yardi.com.

Toy Storage Nation