Facilities in Kapolei and Waipio have changed owners as demand starts to fall
POSTED: 01:30 a.m. HST, Dec 04, 2010
A shakeout in Hawaii's saturated self-storage market has begun, with a large project in Kapolei changing hands after financial struggles.
Local self-storage facility operator Hawaii Self Storage recently acquired Aloha Island Self Storage in Kapolei after the 100,000-square-foot complex was repossessed by a lender in August.
The purchase is a second example of self-storage industry consolidation on Oahu, following a purchase of a Waipio facility in August by national giant Public Storage.
Some industry observers predict there will be more consolidation as stronger competitors acquire weaker rivals in a market that was saturated or overbuilt just as a recession unfolded.
Hawaii's self-storage market for most of the last decade was viewed as dramatically underserved, which led developers to build new facilities at a rapid pace.
The amount of self-storage space in Hawaii doubled from 1.56 million square feet in 2005 to 3.16 million square feet this year, according to a report by local real estate appraisal and consulting firm Lesher Chee Stadlbauer Inc.
But the recession reduced demand for storage space and has prompted some self-storage facility owners to significantly discount prices.
SELF STORAGE CONSOLIDATION
Aloha Island Self Storage was built by a Mississippi-based company in 2006 in an industrial subdivision not far from Costco in Kapolei.
According to a real estate listing last year, the facility was 24 percent occupied.
In August, Bank of Hawaii and Central Pacific Bank repossessed the property for a mortgage value of $8.65 million.
Hawaii Self Storage bought the property from the lenders for $6.5 million in late October, according to property records.
Daniel Ho, president of Hawaii Self Storage, said the industry is headed for consolidation with bigger, more efficient operators acquiring weaker competitors.
Ho said he believes the inventory of self-storage facilities was maxed out just as the recession took hold.
Hawaii Self Storage developed five facilities over the last decade, including one in Kapolei that opened about two years ago.
Ho said the company is making changes to the former Aloha Island facility that include security cameras, new landscaping, extended hours and a new name, Hawaii Self Storage-Kapolei West.
"We will continue to look for other sites for acquisition," Ho said.
Hawaii Self Storage's purchase followed an acquisition by Public Storage of a 73,000-square-foot Metro Self Storage facility in Waipio Gentry for $6.75 million in August.