Self-Storage Possibilities, Nassau County, New York
as “The Island of Possibilities”, Nassau County in New York is one of the self-storage
markets that continues to be strong. Within Nassau County there are two cities,
three towns, 64 incorporated villages and over 100 unincorporated areas. The
entire county is physically divided amongst the three towns (Hempstead, North
Hempstead, and Oyster Bay) and the two cities (Long Beach and Glen Cove).
Within the three towns reside the 64 incorporated villages.
Nassau County is located immediately
east of New York City, within the New York-Newark-Bridgeport, NY-NJ-CT-PA
Metropolitan Statistical Area. The county is one of the four counties that occupy
Long Island, together with Suffolk County to its immediate east and Queens and
Kings counties to the west, which correspond, respectively, to the New York
City boroughs of Queens and Brooklyn. Two cities, three towns, 64 incorporated
villages, and more than 60 unincorporated hamlets are located within the
In 2012, Forbes magazine, in an article based on the U.S. Census Bureau’s
American Community Survey, reported that Nassau County was one of the highest
income counties in the United States and the most affluent in the state of New
York, comprising four of the nation’s top 10 towns by median income. It also
ranks as the most expensive county in America.
Storage Market Rates
Vacancy rates continue to fall below 10 percent with rent growth running close to three percent. Climate controlled units are still in high demand and command a premium of 10 percent to 15 percent over non-climate-controlled units. This trend is occasionally bucked with larger exterior drive-up units. Contractors, landscapers, etc., are typically willing to pay a premium over comparable interior climate-controlled units to secure the ease of access.
Taking into consideration how well
this asset class is performing in Nassau County, few operators are eager to put
their facilities up for sale, choosing instead to reap the rewards of a steady
growing income stream, which is confirmed by the lack of transactions in this
market over the last several quarters. This leads us to our next quandary. What
are capitalization rates for this market? Are capitalization rates trending
down based on decreasing vacancy rates, increasing rents, and increasing demand,
or are they stabilizing/trending up due to the risk that we are at the top of
the market with the ongoing threat of rising interest rates?
To better understand this market, it
is necessary to look at the national and surrounding regional/local markets.
The national average capitalization rate according to our Colliers Survey was
5.85 percent as of the second quarter 2017, an increase of approximately 10
points from the second half 2016. Based on Colliers rating system,
capitalization rates in the Northeast range from 4.5 percent to six percent for
class-A properties, 5.75 percent to 7.25 percent for class-B properties, and
seven percent to 8.5 percent for class-C properties, noting that these rates
ranges have held steady over the past year. Finally, some regional/local sales
which show a capitalization rate range from 4.5 percent to 7.21 percent
include: Briarcliff Self-Storage, which sold on Jan. 1, 2016, for $11.9 million
at a five percent cap rate; GoodFriend Self-Storage Hawthorne, which sold on
Dec. 22, 2016, for $14.1 million at a 4.5 percent cap rate; and Waverly
Self-Storage in Holtsville, which sold on Aug. 19, 2016, for approximately $11.74
million at a 7.21 percent cap rate.
It is also important to point out that,
due to the lack of supply, market participants attempting to gain access or a
stronger presence in this market have turned to re-purposing existing
industrial/commercial structures or the development of new facilities. As these
new facilities hit the market and competition grows, it is anticipated that we
will start to see more family-owned facilities and smaller operators look to
put their assets up for sale before they are pushed out of the market by the
larger, more sophisticated operators. For now, most participants still feel the
self-storage market favors the sellers; thus, we anticipate capitalization
rates in Nassau County and the surrounding trade area will remain stable in the
near term. In addition, ground-up development and redevelopment of existing
buildings will begin to come to market throughout the next 12 to 18 months.
However, with current real estate
taxes at $4 to $5 per square foot and Mayor DiBlasio’s real estate tax
initiative to limit the number of new self-storage properties from qualifying
for the real estate tax abatement program in the neighboring boroughs of Queens
and Brooklyn, the number of new facilities coming on line in the next two years
could be minimal. Thus, we don’t see the need for rental rates being
compromised/discounted in Nassau County with the little new product coming to
market in this market.
Union Realtime has informed us that
there are only 64 existing facilities within Nassau County, with a total of
3,500,000 net rentable square feet and 1,360,000 people, which that translates
into 2.64 people per capita. There is development pipeline of an additional
11.4 percent of new supply in the process (not under construction) that could
possibly bring on 385,000 net rentable square feet of new space. However, that
would only increase the number of square foot per capita by 0.35 percent—an inconsequential
Perhaps Mayor DiBlasio would be more apt
to qualify self-storage for the real estate tax abatement program if the
proposed projects were beautifying the county by converting eye sores into
gems. Conversions of outdated commercial properties in this county into
eye-catching and innovative self-storage facilities may be an avenue worth
Nevertheless, given the stable
occupancies and rates, as well as higher barriers to entry in the real estate
tax realm, it’s safe to say that there is a mass of possibilities for
self-storage to thrive in Nassau County.
The Area Nassau
County has a wide range of offerings that make it a good market for
self-storage. Here are a few of the most notable:
Nassau County is home to numerous colleges and universities, including Adelphi
University, Molloy College, Briarcliffe College, New York Institute of
Technology, SUNY Old Westbury, Nassau Community College, Hofstra University, C.
W. Post Campus of Long Island University, United States Merchant Marine
Academy, and Webb Institute.
Attractions Belmont Park – Home of
the third leg of thoroughbred racing’s Triple Crown, Belmont Park is one of the
oldest and most beautiful tracks in the nation.
The Hamptons – Commonly
known as “The playground of the rich and famous”.
Jones Beach State Park – The
largest public beach in the world offers 6.5 miles of uninterrupted Atlantic
Ocean beachfront, two public swimming pools, and a smaller beach on Zach’s Bay.
Long Beach – Following
the construction of the Long Beach Boardwalk in 1907, Long Beach became known
as the Riviera of the East. Vineyards
– Many years ago, entrepreneurs began converting
the potato farms into vineyards; Long Island has become a leading producer of
Nick Malagisi, SIOR, serves as National Director of self-storage and Senior Advisor for Sperry Van Ness Commercial Realty, specializing in the purchase and disposition of self-storage properties, primarily in the Northeast United States. Malagisi began his self-storage career with industry leader, Public Storage, where he was responsible for site acquisition and development of new properties as well as acquisition of existing storage properties. Since then, Malagisi has participated in the disposition of hundreds of properties from single assets to portfolio sales as a specialist in this asset class. In addition, he works as a consultant in preparing feasibility studies for new developments, testifying in court as an expert witness for condemnation cases, and preparing BOV reports for clients. Malagisi is a 30-plus year veteran of the self-storage industry, a member of SIOR, the Self Storage Association, the Canadian Self Storage Association, NYS Commercial Association of Realtors, and is a board member of the NYS Self Storage Association. Malagisi is a graduate of the Whitman School of Management at Syracuse University and resides with his family in Buffalo, N.Y.
Hans W. Hardisty serves as a managing director with SVN Deegan-Collins Commercial Realty (SVN-DCCR), located in Poughkeepsie and Kingston, N.Y., and specializes in the purchase and sale of self-storage facilities across the tri-state area. Hardisty is a member of the New York State Self-Storage Association (NYSSA), the national Self-Storage Association (SSA), a CCIM Candidate, and holds an MBA. He also has extensive development and management experience.
Other contributing authors include Tom Sapontzis of Colliers International and Cory Silvester of Union Realtime.
Nick Malagisi, SIOR, serves as National Director of self-storage and Senior Advisor