A Stable Secondary Market
The Southern New Hampshire (SNH) region is located within the Greater Boston Combined Statistical Area, positioned along the northern border of the Commonwealth of Massachusetts. The SNH market consists of the six New Hampshire counties of Belknap, Hillsborough, Merrimack, Rockingham, Cheshire, and Strafford, and is home to approximately 84.1 percent of the State of New Hampshire’s total population. The City of Concord, the state capital of New Hampshire, and the City of Manchester, the business hub of the state, serve as the nuclei of the Southern New Hampshire area.
In early 2017, Southern New Hampshire’s regional economy entered a period of expansion, driven by record low unemployment rates, rapid labor force expansion, strong income growth, and favorable demographics. The demographic profile of the Southern New Hampshire region represents an aging population more affluent and better educated than the national average, with a median household income of $69,318 per annum and 34.6 percent of its residents holding a Bachelor’s or advanced education degree. Southern New Hampshire’s household income growth has outpaced national expansion rates over the past decade, due in large part to the migration of businesses away from the expense of Greater Boston and the insurgence of biotechnology and high-technology entrepreneurs in the area. Regional business growth has allowed Southern New Hampshire to become less dependent on its low-value-added industries, and increased consumer confidence has incited diverse payroll growth. Consistent income growth and hourly wage increases have encouraged spending back into the regional economy, maintaining housing market affordability despite rising home prices. The evolving business centers of Southern New Hampshire are investing in mixed-use, live, work, play developments to attract the talent necessary to fill a rising number of high-wage employment positions. Positive population growth is forecast to persist through the near term as young professionals relocate to the area and balance the predominantly retiree demographics. The market benefits from its New England positioning and with the help of its growing labor force and expanding live, work, play environment, Southern New Hampshire will continue to siphon business from Boston’s bustling business hub.
The market’s proximity to the Greater Boston Area, its relative affordability, and the State of New Hampshire’s attractive tax structure support a dense commuter population that travels over the Massachusetts border for work. The commuter climate of the market’s southern counties, particularly Hillsborough and Rockingham, creates a heavily residential economic structure. With Southern New Hampshire’s median household income levels outpacing national growth, increased consumer confidence and disposable incomes have supported the growth of consumer-based and service industries. The region is also home to a strong student population given its concentration of colleges and universities, including Dartmouth College, the University System of New Hampshire, Colby-Sawyer College, Keene State College, New England College, Plymouth State University, Saint-Anslem College, and the Community College System of New Hampshire. Southern New Hampshire’s strong commuter population, number of under-graduate and graduate students, and historically industrial-based regional economy have all supported the growth of the self-storage industry in this secondary New England market in recent years.
According to the 2017 Self Storage Almanac, the State of New Hampshire has 197 self-storage facilities that total approximately 1.330 million square feet of storage space and has a supply of 7.75 square feet of storage per person. This per-person supply figure is well below the MA-NH MSA figure of 3.28 square feet of storage per person. The various sources do not report data specifically for Southern New Hampshire MSA, but as the home to 84.1 percent of the State of New Hampshire’s total population, the southern region is accurately representative of the state’s economic climate. Based on Cushman & Wakefield’s supply analysis, the square feet per person is closer to 5.0 square feet.
The supply of facilities in the Southern New Hampshire market varies from mom-and-pop facilities to converted buildings to purpose-built facilities. Product also ranges from small single-story structures with few amenities to modern multi-story projects.
The majority of the national brands are located in the market and include Public Storage, Extra Space Storage, CubeSmart, Life Storage, and U-Haul. There are also a number of local operators with multiple locations, specifically Bluebird Self Storage. The Southern New Hampshire market has experienced a self-storage development boom with new facilities opening in Seabrook, Merrimack, Manchester, and Rochester, adding over 200,000 square feet of new supply. In addition, there are four other projects in development:
In addition to these projects, there are developments in the planning stages for Londonderry and Brentwood. The significant increase in development is primarily attributed to the tight supply and lack of any new self-storage development within the market over the past decade. However, there are some indications that due to the new supply the market is approaching equilibrium with some stating that it is over supplied. Nevertheless, current market trends indicate that occupancy levels are still 90 percent or higher, and rental rates have not declined since last year.
Demand for storage in the Southern New Hampshire market comes from a variety of sources, including residential, industrial, and commercial. The market primary demand area is generally identified as the Route 3 corridor, Interstate 93 corridor, and the Seacoast area. These areas include the cities of Manchester, Nashua, Concord, and Portsmouth. Similarly, the percentage of renters within the city limits is as high as 70 percent, also contributing to the demand for self-storage.
The population growth figures for the next five years are expected to be slightly below the state and country, but at higher than the 2010 to 2016 figures. The larger MSA’s average household income is slightly greater than the average of the state ($92,582 and $87,718, respectively). Therefore, the demand for self-storage is expected to remain stable as there are no apparent factors in the near future that would have a significant impact.
Southern New Hampshire is viewed by investors as a secondary investment market. It does benefit from its proximity to Greater Boston, which continues to be a top-10 real estate investment market. Investors continue to look for opportunities outside of the Greater Boston core market. The result has been increased interest in the secondary New England markets of Southern New Hampshire and Greater Portland Maine. In fact, 2016 produced two of the largest self-storage portfolio sales in Southern New Hampshire history.
Furthermore, rental rates are the highest in the state according to the 3rd Quarter 2016 figures from the 2017 Self Storage Almanac. For instance, the average price of a 10-by-10 non-climate-controlled unit in the MSA is $134 versus the state average of $113. Similarly, the average price of a 10-by-10 climate-controlled unit in the MSA is $142 versus the state average of $139. While the Southern New Hampshire remains the strongest market in the State of New Hampshire, it is not considered a national primary investment market.
While the Southern New Hampshire market is primarily viewed as a secondary market due to its smaller size and the supply of facilities, it has recently attracted national investors. The demographics indicate stable demand for storage in the near term. Furthermore, current market trends indicate that the new supply that has entered the market over the past few years has not negatively affected occupancy or rental rates. However, the continued development of new facilities bodes watching as the market does appear to be reaching equilibrium.
Sean T. Finnerty is a senior director for Cushman & Wakefield of Massachusetts, Inc.