While The Hampshire Companies has dabbled with self-storage for over two decades, and it’s the new emphasis on that industry what makes the Hampshire’s strategy noteworthy.
In the last five years, Hampshire has repositioned and developed over 52 projects that have amassed a value of over $750 million. The company has made several investments in self-storage with Extra Space Storage, who manages part of the company's portfolio, but it also invested outside of its partnership with Extra Space and has announced plans to increase its pipeline.
Mark Rosen, principal at Hampshire, said the firm sees the value of this kind of investment from looking at demographic trends.
“People want to be in the Monclair’s, in the Morristown’s, so they’ll move into these apartment complexes and they need place to put their stuff,” he said. “This urbanization, this transition is actually really good for the self-storage business because it runs in tandem.
“And even though self-storage is becoming more known to the community and the public at large, it is still a market that has a lot of growth.”
And neither Rosen nor Hampshire are just talking about observing trends, either. The company has plans to add 10 self-storage projects to its pipeline every year for the next three to five years depending on the market. And while the company has made northern New Jersey its home, it is currently working throughout the East Coast to meet that demand.
Hampshire has 13 projects at various stages in New Jersey, North Philadelphia, Massachusetts, Rhode Island and Florida.
The key, Rosen said, is in the type of investment this type of industry requires.
“When we first started looking at this business, one of the things that was really attractive is you can use warehouse space and do warehouse development and cost, which is a lot less than retail or office because there is a lot more infrastructure you have to put into those buildings,” he said. “Warehouse is a lot less. Then, you take these prefabricated units and put them into the warehouse building and you charge a much higher rent than you can get for your warehouse. In that regard, it’s a much efficient use of your overall space. And you can drive higher margins.”
A low capital investment in construction is always good news for developers, of course, but the lack of awareness of what self-storage can do for a town can be costly. Rosen said it is not uncommon for zoning, approvals and pushback from the community to delay development for up to three years. The challenge, he said, comes in educating towns about the benefits self-storage can bring.
“It’s actually harder (to build self-storage) because most municipalities think of self-storage as a pullup garage eyesore,” he said. “So, when you say you want to put a self-storage unit into a community, they say they don’t want to have them.
“Part of the process to get there is to educate. Whether it’s a town council or the mayor or the people that may be objecting because they don’t know that we can get (self-storage) to look like an office building, it can be made to look like an apartment building and that they are aesthetically pleasing as opposed to the eyesore that we all see driving through New Jersey from going way back.”
Rosen said it is also a timely endeavor to lease all the units.
At its latest project in Westwood, he said, a conservative estimate of up to three years to lease and grow rents was given. On the other hand, Rosen has seen other projects lease up and begin to maximize rents in a third of that time, so the jury is still out on stabilization.
With an unmet demand and urbanization taking a bigger hold throughout the state, The Hampshire Companies sees developing self-storage assets a crucial part of its investment portfolio.
“We’re looking at all the trends of where the Millennials want to live and they want to have the urban life, but they want the outdoor lifestyle, so you’re seeing a lot of towns adopt (self-storage),” Rosen said. “This is a business we have liked since the beginning. And we made this one of our key investments in our portfolio for our company.”