A beautiful facility in a bad supply pocket can become a mediocre investment.
New supply can temporarily pressure existing properties by 5 percent to 10 percent occupancy. A market with 10 square feet of storage per capita and multiple projects under construction may justify a 50 to 100 basis point higher cap rate than a similar market without new projects. That is why professional buyers care so much about pipeline data. A facility’s profit and loss statement tells you where it was. A facility’s rent roll tells you where it currently is. The supply pipeline tells you where it could go.