This article originally appeared in the Orange County Business Journal.

NEWPORT BEACH — Buchanan Street Part­ners recently broke ground on a 99,500 square-foot stor­age prop­erty in Santa Cruz County, advan­cing its strategy to build a self­-stor­age port­fo­lio exceed­ing $1 bil­lion.

Buchanan, which has $1.6 bil­lion in assets under man­age­ment, is redevel­op­ing a 2.6-acre site at 10 Vic­tor Square in Scotts Val­ley into a three-story, 760-unit self-stor­age facil­ity.

Offi­cials said it is sched­uled for com­ple­tion in April 2027. Demoli­tion began in Janu­ary.

Buchanan has partnered with DAI Gen­eral Con­tract­ing as the gen­eral con­tractor and Valli Archi­tec­ture as the project archi­tect. East West Bank is provid­ing con­struc­tion fin­an­cing.

Self-Stor­age Invest­ments

Buchanan Street Part­ners acquired the prop­erty for $5.25 mil­lion from a private investor after roughly 14 months of enti­tle­ment work, accord­ing to CoStar.

The Scotts Val­ley project is the com­pany’s eighth self-stor­age invest­ment in Cali­for­nia over the past five years and is part of an ini­ti­at­ive that began in 2021 to acquire and develop self-stor­age assets in spe­cific West­ern mar­kets.

Buchanan offi­cials say they have inves­ted about $325 mil­lion in self-stor­age to date, with a primary focus acquir­ing assets in mar­kets includ­ing San Fran­cisco, Los Angeles, San Diego, Orange County and the Inland Empire.

The com­pany has also inves­ted in other mar­kets such as Den­ver, Las Vegas, Phoenix, Port­land, Seattle, Dal­las and Aus­tin.

“Self-stor­age has con­sist­ently proven to be one of the most resi­li­ent asset classes within com­mer­cial real estate,” Feerooz Yacoobi, senior vice pres­id­ent of Buchanan, told the Busi­ness Journal. “Demand is driven by life events such as mov­ing, downs­iz­ing, busi­ness form­a­tion, and fam­ily trans­itions, which occur regard­less of broader eco­nomic con­di­tions. Over the past dec­ade, demo­graphic tail­winds includ­ing pop­u­la­tion growth, hous­ing afford­ab­il­ity chal­lenges, and smal­ler liv­ing spaces have sup­por­ted long-term demand and increased con­sumer adop­tion.”

The invest­ment comes as the self-stor­age busi­ness is hit­ting a bit of a plat­eau as 2026 begins, with the rent hikes of pre­vi­ous years finally cool­ing off, accord­ing to the Self-Stor­age Mar­ket Out­look report from Yardi Mat­rix.

Accord­ing to the report, the aver­age monthly rent for a unit hovered around $16.32 per square foot in Decem­ber, a 0.3% year-overyear increase. The winter sea­son is usu­ally the slow­est for demand due to a decline in mov­ing activ­ity.

Mean­while, the report states that people are still pay­ing slightly more for premium, cli­mate­con­trolled spaces—sim­ilar to the ones that Buchanan likes to build.

Des­pite flat­ten­ing prices, developers haven’t stopped build­ing. There are more than 54 mil­lion square feet of new stor­age space under con­struc­tion nation­wide, with a massive con­cen­tra­tion in Flor­ida and the South­w­est, the report states.

“We believe cur­rent pres­sure on rental rates is closely tied to the stalled hous­ing mar­ket, which has lim­ited house­hold mobil­ity,” Yacoobi said. “As res­id­en­tial trans­ac­tion activ­ity nor­mal­izes and people begin mov­ing again, we expect stor­age demand to reac­cel­er­ate.”

Mod­ern Facil­ity

In Scotts Val­ley, Buchanan offi­cials are bet­ting on lim­ited com­pet­i­tion and an aging sup­ply of stor­age facil­it­ies.

The new­est com­par­able self-stor­age product in the area is nearly 25 years old, Jon Sud­darth, vice pres­id­ent of Buchanan Street Part­ners, said in a news release.

The com­pany is bet­ting that a new mod­ern facil­ity could attract nearby res­id­en­tial and com­mer­cial users.

“We see strong and grow­ing demand for Class A facil­it­ies that deliver a super­ior cus­tomer exper­i­ence and oper­ate more effi­ciently,” said Yacoobi. “Mod­ern prop­er­ties con­sist­ently achieve higher rents, stronger occu­pancy, and bet­ter long-term com­pet­it­ive­ness, par­tic­u­larly in afflu­ent, high-dens­ity mar­kets where new sup­ply is con­strained.”

The project sits just off High­way 17 near a gro­cery-anchored retail cen­ter, Buchanan offi­cials said.

Bey­ond Scotts Val­ley, Buchanan is devel­op­ing addi­tional self-stor­age facil­it­ies in Upland and the Bay Area.

Last fall, the com­pany began con­struc­tion on a new 1,025-unit, three-story, 66,250-square­foot Class A self-stor­age facil­ity at 1341 San Mateo Ave. in South San Fran­cisco.

Offi­cials said they are bank­ing on cap­it­al­iz­ing on one of the most densely pop­u­lated and sup­ply-con­strained mar­kets in the Bay Area, where new devel­op­ment is scarce and rents fetch a premium.

In Decem­ber, Buchanan also spent $21 mil­lion on a newly con­struc­ted, 103,000-square­foot Class A self-stor­age facil­ity with 1,130 units at 9560 West Flamingo Road in Sum­mer­lin, a mas­ter-planned com­munity in the Las Vegas area sub­urbs.

The cli­mate-con­trolled prop­erty was 90% occu­pied. More than 162,000 res­id­ents live within a three-mile radius of the facil­ity, and the area will soon be home to the $1.8 bil­lion Sum­mer­lin Stu­dios, Buchanan offi­cials said.

Long Term Growth

Yacoobi said that for Buchanan Street Part­ners, self-stor­age is more than just a prop­erty type—it’s a long-term bet on how people live.

The New­port Beach invest­ment firm launched its self-stor­age plat­form in 2021 with back­ing from high-net-worth and fam­ily-office investors, aim­ing to raise assets under man­age­ment to a few hun­dred mil­lion.

Yacoobi says self-stor­age’s appeal lies in its sta­bil­ity, as it per­forms well in both strong and weak eco­nom­ies. For the lat­ter, this was true dur­ing the Great Reces­sion, when stor­age out­per­formed many other com­mer­cial prop­erty types.

“It’s a reces­sion-res­ist­ant asset class,” he said. “If you think about it, self-stor­age does well in times of eco­nomic expan­sions, where you have grow­ing con­sumer spend­ing, people buy­ing new homes, busi­nesses grow­ing, and a lot of eco­nomic activ­ity and mobil­ity. And then on the flip side, which is a sad part of our busi­ness, but we also serve a need and do well in terms of eco­nomic con­trac­tion.”

Since then, Buchanan has expan­ded its strategy. They now buy sta­bil­ized prop­er­ties and develop ground-up projects from scratch in high-demand mar­kets, in addi­tion to pur­chas­ing newly built facil­it­ies.

Yacoobi said self-stor­age often acts like an extra room for con­sumers.

With hous­ing costs high, espe­cially in coastal Cali­for­nia, many renters and homeown­ers use stor­age instead of extra closets, gar­ages or spare bed­rooms.

Yacoobi said about 1 in 10 or 11 Amer­ic­ans use self-stor­age, and many are women who prefer to store their items in newer, cli­mate­con­trolled facil­it­ies.

The typ­ical unit is about 10 by 10 feet, or roughly 100 square feet—enough space for a one-bed­room apart­ment’s con­tents. These units usu­ally rent for $2 to $4 per square foot, which means many cost between $200 and $400 per month.

“We’re not try­ing to be the largest player in the sec­tor, but we’re focused on insti­tu­tional qual­ity,” said Yacoobi. “With (our) West Coast assets, our goal is to build a high-qual­ity port­fo­lio that will appre­ci­ate over time and grow rev­en­ues. With the West Coast mar­kets we focus on, we want to be attract­ive to any insti­tu­tional investor look­ing to enter this space.”

ABOUT BUCHANAN STREET PARTNERS

Buchanan Street Partners is a real estate investment firm based in Newport Beach, California that focuses on investments in commercial and multifamily properties as well as providing loans as a direct lender. Having invested in over $8 billion worth of real estate assets in its 25-year history, Buchanan Street has an established track record in the commercial real estate industry. The company is comprised of a highly skilled team that has invested through multiple real estate cycles enabling them to identify opportunities and maximize value while prioritizing capital preservation. www.buchananstreet.com