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May 2008 |
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Issue 2 |
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For the past six months, markets have been dominated by two words: CREDIT CRISIS. This crisis has led to significant market volatility; with risk departments, banks and investors all pulling back their underwriting criteria to extremely conservative standards. Yet despite these macroenvironmental market conditions, the self storage property type has achieved some impressive returns that are now beginning to attract investors who have been waiting on the sidelines during the credit crisis. At the Storage Investor Caucus, hosted by HFF’s Self Storage team on May 1, 2008 in Houston, HFF shared recent economic data and real estate investment statistics with the 60 storage owners, investors and affiliated industry professionals in attendance. The clear majority supported the viewpoint that “the worst of the credit crunch is now over.” Federal Reserve Chairman Ben Bernanke offered similar comments on May 13th, noting that financial markets have improved following central bank actions during the last eight months. These viewpoints are buttressed by recent data showing that commercial real estate fundamentals for core Class A assets have remained strong in the self storage property type. As noted in the chart below, storage property loan delinquencies are still the lowest compared to the entire commercial real estate market, and have been decreasing for the last three quarters. |
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These latest statistics demonstrate that self storage remains a strong and stable asset class, even during rough economic times. The HFF Self Storage team projects that deal volume will begin to pick up during the second half of 2008 due to the strong fundamentals and stable returns associated with owning self storage property. |
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CMBS Spreads Contracting Commercial mortgage backed security (CMBS) spreads are now recovering from their high points reached in late February/early March, suggesting that we may have finally hit the bottom in the CMBS market. Among the most notable developments in the past month has been the spread between LIBOR (30 day) and the Fed Funds rate. The gap between the two rates is now beginning to narrow, which points to future stability in credit markets. While we are still far from the industry’s historical stable market range of 10 to 15 basis points, we are encouraged by this positive data that show spreads moving in the right direction. CMBS spreads show signs of recovering after hitting a high in March
LIBOR (30 day) begins to drift towards the Fed Funds (policy rate), suggesting future stability
Created and distributed by HFF Self Storage, formerly Storage Investment Advisors (SIA), Market Watch is a monthly electronic newsletter that provides storage owners and investors with brief highlights and analyses of the latest market developments, investment real estate activity and financing news. Our hope is that this information, interpretation and analysis will help you better understand current self storage real estate and financial conditions, and support your investment decisions. If you have a story idea for a future issue of Market Watch, or want to learn about a particular aspect of the self storage real estate or finance industry, let us know! Please forward your ideas and suggestions to Market Watch Editor Doug McCarron at dmccarron@hfflp.com or 310-908-4728. Contact us to learn how we can assist with your disposition, acquisition, or financing needs.
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©2008 Holliday Fenoglio Fowler, L.P. HFF (NYSE: HF) operates out of 18 offices nationwide and is a leading provider of commercial real estate and capital markets services to the U.S. commercial real estate industry. HFF offers clients a fully integrated national capital markets platform including debt placement, investment sales, structured finance, private equity, note sales and note sale advisory services and commercial loan servicing. |
