Nitesh Sapra was drawn to Tampa Bay for its entrepreneurial energy, fast-growing population and great weather.
"We're focused on cool cities, cities we want to hang out in," he said. Think: Chattanooga, Durham, Louisville.
It's also a key, emerging market for Sapra's fast-growing family business: Self storage.
That's right: Those big ugly complexes often found tucked behind old industrial space. After those properties continued to make money through the Great Recession and the economic recovery, investors have been cutting big checks for self-storage facilities in underserved markets like Tampa Bay, resulting in a rush of new construction and turning heads one of the hottest sectors of the real estate market.
"The cat's really out of the bag," said Jay Crotty, managing partner of SkyView Advisors, a Tampa-based brokerage firm that specializes in selling self-storage facilities.
Wall Street investors have taken a great interest in self-storage, which is considered a "non-traditional" investment property in the same realm as student housing and nursing homes.
"It's not sexy; it's not glamorous," Crotty explained, but it makes money.
STR, a data and analytics specialist that recently began tracking the industry, estimated the Tampa Bay metro region has 371 self-storage facilities. There are roughly 30 more in development, said Luke Elliot, associate vice president of investments for Marcus & Millichap in Tampa.
"You can have facilities open up four and five miles apart and they're barely competitors," he said. "You look at an area that is as big as Tampa Bay is, that's a lot of space and a lot of people (who need storage)… Tampa and St. Pete are on everybody's radar nationally."
Some neighborhoods in St. Petersburg, Brandon and East Tampa are already becoming oversaturated, he said, while others have relatively few locations so far.
"I have clients right now who are buying older facilities to tear them down and rebuild," he explained.
The businesses tout consistently high occupancy rates and low overhead costs, making it more profitable than other commercial properties. Research firm IBISWorld reported that the industry is largely protected from swings in the economy. In times of economic turmoil, consumers downsize their living quarters and need somewhere to store their extra belongings. When the economy is doing well, consumers need extra space for new purchases. Think of the boats, RVs and snowboards that won't fit in the garage.
Self-storage companies outperformed the stock market during the recession, catching the eye of investors, bringing in plenty of cash and forcing the industry to grow up. Uncle Bob's Self Storage has been rebranded as Life Storage, for example. Startups have emerged in major metropolitan areas like New York and Miami to bring self-storage into the on-demand economy. Temperature and moisture control features are the norm.
Historically a technology laggard, the industry is now using software to incorporate dynamic pricing methods rather than a set price for renting that 10-by-10-foot storage space. Some developers are installing carpeting in each space, or in Sapra's case, piping in music to create a more calming environment. Rather than gawdy orange doors next to the interstate, new multi-story developments are being put into high-demand urban areas, disguised to look like office space.
About two years ago, Sapra's company, Atlanta-based NitNeil Partners bought an acre of land in the old industrial area in Tampa's North Hyde Park neighborhood, near the University of Tampa. It's across the street from a luxury apartment complex and a new coffee roastery.
The nearly $5 million building has lots of windows and a modern white and grey facade, with glass overhangs above the entrances.
Roberto Torres was disappointed to find out that his new roastery, The Lab, would be located next to a storage facility.
"I haven't heard anyone saying it's a sexy storage facility," he said. "But as long as the design fits, it's well-lit and has parking, I think it's a good thing."
You won't find economic development officials or neighborhood associations rooting for storage facilities. The average facility employs 3.5 full-time workers, and rather than a store, restaurant or movie theater, it isn't a traffic driver.
The cash influx coming from self-storage also is creating frustration from other real estate sectors, like retail. Jim Kovacs, managing director of retail services with Colliers International in Tampa, said his team has lost a handful of property bids to self-storage developers who can pay much more per square foot.
Colliers recently lost a bid to a $1.8 million property that will be the new site of a self-storage facility at the corner of Kennedy Boulevard and Rome, less than a mile from Sapra's new facility, which opens later this month. Within a one-mile radius of that property is already a Public Storage, Hyde Park Storage and an Extra Space Storage.
Across the bay, a Miami company recently bought and demolished the Mosley Motel on 34th St. N in St. Petersburg this summer to make way for a climate-controlled storage facility.
The city's Development Review Commission last month approved plans for two self-storage facilities, one on 4th Street N at 72nd Avenue, the other on Gandy Boulevard. In total, they would add more than 1,000 storage bays.
"It's a waste of good commercial space," Kovacs said. "They are innocuous rather than beneficial to the community."
Self-storage developers argue that their properties have little if any impact on traffic patterns, pay full taxes and are an important part of a growing community, especially in high-density areas like downtown Tampa or St. Petersburg, where renters don't have much closet space.
"The industry is getting a bad rap from some journalists where they reduce the storage customer to a hoarder — but the reality is the storage supports small business as well as anyone going through a transition," Sapra said.
Contact Alli Knothe at [email protected] Follow @KnotheA.