The Rising Appeal of RV and Boat Storage: Trends, Insights, and Investment Opportunities
In recent years, the RV and boat storage sector has garnered significant attention from investors and traditional self-storage owners. This interest stems from the sector's similarities to self-storage, including a fragmented industry with low operating costs and high margins, robust demand coupled with limited supply, and significant potential for income growth. As a result, there has been a notable increase in transaction volumes and pricing, even as development struggles to keep pace with rising demand.
The Attraction of RV/Boat Storage
RV and boat storage is often considered a subset of the self-storage industry. Many traditional self-storage facilities offer parking spaces for RVs and boats, alongside commercial and personal vehicles. However, these facilities often lack the specialized amenities and services that modern RV and boat owners desire. Although new supply has been introduced to address these needs, there remains a significant supply-demand imbalance, creating a unique investment opportunity.
Increasing Demand for RV and Boat Storage
The surge in demand for RV and boat storage is partly due to record consumer interest in RVs and boats. Nationally, RV registrations increased by 22 percent between 2017 and 2021. Although RV sales dipped in 2022 to approximately 493,000 units from the 2021 peak of over 600,000, they remained well above the historical average of 360,000 units per year. Boat shipments also hit an all-time high in August 2023. This growing demand is driven by increased interest in domestic travel and outdoor recreation, further fueling the need for storage facilities as many homeowners are restricted from parking RVs and boats on their property.
Supply Constraints and Development Challenges
Despite rising demand, the development of RV and boat storage facilities has lagged due to various supply constraints, such as the significant land requirements, high construction costs, and the complexities of the entitlement process. Yardi Matrix tracks 1,380 dedicated RV and boat storage properties across 42 states. While RV registrations surged by 22 percent from 2017 to 2021, the number of dedicated storage facilities only grew by 9.8 percent during this period. Although there was some increase in supply in 2022, the annual delivery rate has averaged just 2.6 percent over the past five years, compared to the 4 percent annual supply growth for traditional self-storage properties.
Investor Interest and Market Dynamics
The attractive supply and demand characteristics of the RV and boat storage sector have caught the attention of investors. Transaction volumes and pricing have soared, with a record 114 RV and boat storage sales in 2022 and 103 in 2021, compared to an average of 42 sales per year from 2015 to 2020. The average sales price for RV and boat storage properties has increased to nearly $1 million per acre in recent years, up from $428,000 per acre between 2015 and 2020.
This increased interest is largely driven by large owners and operators, many of whom are new entrants to the sector, aiming to build national brands. Despite this, 88 percent of properties are still owned by individuals or entities with a single property, indicating that the sector is ripe for consolidation. Large investors and operators can leverage economies of scale and operational expertise to capitalize on this fragmented market.
Regional Supply and Demand Factors
Similar to traditional self-storage, RV and boat storage demand varies regionally. According to the RV Industry Association, RV ownership is highest in the Western states, with 25 RVs registered per 1,000 residents, followed by the Midwest with 23 RVs per 1,000 residents, and the Southeast with 15 RVs per 1,000 residents. The Northeast has the fewest RVs per capita, with 10 per 1,000 residents. However, even in regions with lower RV ownership, demand for parking can be strong due to stringent local parking restrictions.
Supply Challenges and Market Saturation
Calculating RV and boat storage supply can be challenging, as most properties have little to no enclosed parking space recorded in property records. Of the dedicated RV and boat storage properties tracked by Yardi Matrix, only about half include enclosed parking spaces, with the majority offering uncovered spaces. Additionally, many traditional self-storage properties also provide parking, making it difficult to assess overall market saturation accurately.
Using typical parking ratios and average parking square footage, Yardi Matrix estimates that there are approximately 267 million net rentable square feet of RV and boat parking nationally, with 75 percent at dedicated RV and boat storage properties and 25 percent at traditional self-storage properties. The top markets for total square footage and parking saturation per capita include Dallas, Houston, Denver, Atlanta, and Phoenix.
New Supply and Development Trends
Development activity in the RV and boat storage sector has picked up in recent years, with 45 new facilities expected to be completed in 2023, up from 37 in 2022. This increase in supply is in line with long-term averages and reflects the surge in demand. However, future supply growth may slow due to rising interest rates and development costs.
Much of the new supply is concentrated in high-growth Sun Belt markets like Texas and Florida, with Dallas leading the way. Other significant markets for new development include Denver, Phoenix, and the Southwest Florida Coast.
RV and Boat Storage Rents
Yardi Matrix tracks asking rates for RV and boat storage, showing a composite of common parking space configurations compared to traditional self-storage units. As of September 2023, annualized rents per square foot for parking spaces were approximately $6.14, significantly lower than the $15.98 for self-storage units. Rent growth for parking spaces has been steady, outpacing traditional self-storage since September 2022.
Current Ownership and Investor Demand
Investor interest in RV and boat storage is at an all-time high, with a record number of sales in recent years. Despite this interest, ownership remains highly fragmented. The top five owners control only 8.4 percent of dedicated RV and boat storage properties nationally, compared to 15.3 percent for the top five self-storage owners.
Much of the recent acquisition activity has been driven by new entrants who have raised significant funds for purchasing RV and boat storage properties. Companies like RecNation, SpareBox Storage, and The Macritchie Group have been particularly active buyers, leveraging their sector knowledge and operational expertise to build national brands.
Conclusion
The RV and boat storage sector presents a compelling investment opportunity, characterized by robust demand, limited supply, and significant potential for growth. While development activity has increased, supply has not kept pace with demand, creating opportunities for investors to capitalize on this emerging niche. Understanding regional supply and demand factors, as well as the unique characteristics of RV and boat storage properties, will be crucial for success in this sector. As interest from large investors and operators continues to grow, the RV and boat storage market is poised for further consolidation and growth, offering attractive returns for those who can navigate its complexities.
If you are considering entering the RV and boat storage market, Loan Analytics is a company that provides comprehensive RV and boat storage feasibility studies. Our expertise can help you understand market dynamics, assess demand, and make informed investment decisions, ensuring your success in this promising sector.
Source: MMCG
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