Inside Self-Storage in CA with CushWake's Kevin Cuff

THE SELF STORAGE REPORT — EPISODE TRANSCRIPT Episode: Inside Self-Storage in California with CushWake's Kevin Cuff Guest: Kevin Cuff — Director, Self Storage Advisory Group, Cushman & Wakefield (San Diego) Host: Chris Berg — Abernathey Development Published: March 5, 2025 (live) Video: https://www.youtube.com/watch?v=dIZU5bXwm5A Key topics: Backing into self-storage from the Cushman & Wakefield San Diego research department, why a niche beats generalist brokerage, self-storage as a "boring" asset class with an art to it, Kevin's 2014 Division II national championship at Colorado State University Pueblo, a fast start to 2025 (Vista 112,000 NRSF, Carson and Carlsbad 270,000+ SF portfolio, Newark in the Bay Area, a Palm Springs listing), the Carson/Carlsbad portfolio drawing ~15 offers and trading at a sub-5 cap on trailing numbers with adjusted taxes, Vista and Newark bought around a 4 in place stabilizing to the low-to-mid 6s, the Q4 2024 wave of product hitting the market as the Fed eased, core funds and private equity (KKR) and the REITs coming back to the table, interest rates as the sector's biggest threat, California's proposed rent-control bill, why in-place rate data makes it hard to pinpoint where rents truly are, California submarkets to target (San Diego, Orange County, Inland Empire, East Bay, San Jose, the peninsula, north of San Francisco, Fresno/Central California), the LA state of emergency and the Palisades and Altadena fires, construction costs and subcontractor availability, and city moratoriums that wipe out roughly half of San Diego County for storage development. Note: Speaker attribution reconstructed from YouTube captions. Light cleanup of transcription errors only; wording preserved. ————————————————————————————— Chris Berg: Welcome to the Self Storage Report. Today we're talking about self-storage with a good friend of the show, Kevin Cuff. He's with Cushman & Wakefield and their Self Storage Advisory Group, and he's off to a fantastic 2025, which we'll talk more about here in a moment. So Kevin, welcome to the show — it's great to have you with us, man. Kevin Cuff: Yeah, thanks for having me on, Chris. Good to be here. Chris Berg: You have been crushing it so far this year. So as I mentioned, we'll jump into that in a second, but let's just start with: why commercial real estate? And then I always love to ask people — okay, once you get in the business, why self-storage? How did you end up in self-storage? Kevin Cuff: Yeah. So I mean, for me, I guess I kind of backed my way into self-storage. Growing up, my dad was somewhat involved in the real estate industry — he did title — and so I kind of grew up around a lot of these guys that were brokers or principals in the real estate industry, and always kind of pointed to it and said that's something I want to do. You always love the tangible aspect of real estate. And coming out of college, I knew some of the guys here at Cushman, and they basically pointed me to the research department and said, "This is how everybody at Cushman in San Diego here gets in the door." And so I went down that road. I was basically an intern in the research department for about a year and a half, and eventually joined on with a group that was doing kind of more private-client investment sales across San Diego — a lot of office, retail. And I did that for three or four years, and kind of out of the blue I was looking for a change, and my manager came up to me and he said, "Hey, do you know Greg Wells? He's thinking about hiring someone, wants to bring someone on to join him on the self-storage group." And kind of ran with it from there. Chris Berg: So is there something about that asset class that really piqued your interest, that you loved? Or was it just like, hey, the door opened, I might as well just walk through it? Kevin Cuff: You know, I'd be lying if I said there was something about it that piqued my interest. I think what really interested me out of the gate was the fact that real estate is such a niche — or at least the commercial brokerage world has become very niche-focused. And as I look around the office and the industry, everyone here who kind of focuses on one thing seems to always be at the top of the board when it comes to producer rankings over here. So I saw it as a really interesting asset class, one — and then two, a way to really kind of form a niche and have something to run with going forward. Chris Berg: It sounds sort of antithetical, but yet I think one of the things I love about self-storage: it's just a boring asset class, right? Kevin Cuff: It's certainly not the sexiest asset class, right? Every time we're touring a property, everyone likes to make a comment like, "God, it's beautiful," right? You're touring garages, basically. But there's an art to it for sure, and there's something sexy about making money — which a lot of people in this asset class seem to have figured out. Chris Berg: I was just going to — you summed that up really, really well. So if we have time too: you're very modest about it, but you also won a national title playing football in college. So maybe at some moment, if you want to weave that into the conversation at some point, I think that would be awesome. Kevin Cuff: You know, I appreciate it. That was another lifetime ago, it feels like. But yeah, I played at Colorado State Pueblo, which is a Division II — it's about an hour and a half south of Denver — and we won the national championship in 2014. So yeah, that was a little over 10 years ago, but still a great memory. Chris Berg: Playing linebacker, right? Kevin Cuff: Yep, I was an inside linebacker, yeah. Chris Berg: All right. I was just calling them audibles. Kevin Cuff: You're a quarterback — you guys get all the love, you know. That's why you got your own show here. Chris Berg: Exactly. You were doing all the right things. All right, let's talk about your start to 2025. I mean, it's just been fantastic. We just put an offer on one of your listings in Palm Springs last week. And then you've got the site here down in Vista — 112,000 net rentable square feet — that was about a month ago. Also about a month ago you had a property in Carson and in Carlsbad, 270,000-plus. Then a couple months ago, another one in Newark up in the Bay Area. I mean, that's just a great way to kick off the year. What can you share with us about these assets? Kevin Cuff: Yeah, I mean, all of them — I guess two out of three were kind of a similar story. So both Newark and Vista were kind of late-stage lease-up assets. Vista in particular, our client had bought in 2021, kind of at the peak of pricing. They bought it right at CofO. And for them it was a good performing asset that — you know, they bought it in a fund that has a life cycle on it, and after three years they had done a really good job of physically stabilizing it and starting to kind of step on rate increases. But as the market has shifted, interest rates had shifted, I think their focus was, "Let's offload this asset and we can put these funds to better use." So I think that will be a really good asset for the eventual buyer there. Newark was kind of a similar story. That asset delivered in 2021, it was late-stage lease-up. Extra Space was managing that one, really had started to step on the existing customers and get the rates up — I think they were the first year of rate increases, they got rates up I think somewhere close to 50%. So it was really the new buyer stepping in following that business plan. And then Carson and Carlsbad is kind of a different story. That was truly stabilized product in two really good trade areas in Southern California. Those were institutionally owned, and then StorQuest was third-party manager. So not a ton of upside on those deals, but definitely some nominal increases that will happen over the first three years. And I mean, Carson and Carlsbad — couple of great markets. You'd like to think, especially in California here, fairly safe assets to invest in. Chris Berg: So can you give us — whether it's price per square foot, any pricing information you want to share with us about these assets? Kevin Cuff: Yeah. I mean, Carson and Carlsbad, I'll dive into that one. I think that deal in particular really shows the appetite for core stabilized self-storage product, especially in Southern California. I think in total we had somewhere close to 15 offers that came in, from high-net-worths to a lot of operators with core funds as partners. At the end of the day, I can't share too much on the price of the total portfolio, but can share that on trailing numbers with adjusted taxes, that was a sub-five cap. Chris Berg: Just let that sit for a minute. That's good to know — thank you. Pretty strong pricing there on that portfolio. Kevin Cuff: Yes, I would say so, especially in today's environment. Chris Berg: So anything you can share in those regards as far as cap rate or other info as far as Vista and/or Newark? Kevin Cuff: Yeah, I mean, both of those kind of were bought in place right around a four, with a lot more upside on those deals — kind of stabilizing somewhere in the low to mid sixes. Chris Berg: That sounds pretty fair. So what are you seeing right now in the market overall? I mean, again, obviously you're off to a great start, but are you seeing more things beginning to come on the market? If so, why? Give us your analysis. Kevin Cuff: Yeah, I think we're definitely seeing activity pick up here to start the year. I think we definitely saw a wave right at the end of last year of activity — as interest rates, as the Fed started decreasing interest rates a little bit, I think we saw a lot of product come to market right in fourth quarter of last year, which is some of the stuff we're seeing trade right at the beginning of this year or end of last year. As we start the year here, I think there's still a lot of equity and a lot of buyers in the market chasing deals. I don't think we've seen quite the flurry of new deals come out to start the year, but I do think we're going to start to see that going forward. Part of that could be the new regime coming into office and just a little bit of a waiting-out period, to see, kind of let the dust settle. But certainly, I think compared to this time last year, a lot more activity in the market. Chris Berg: I mean, yeah — 15 offers on that Carson/Carlsbad obviously is nice to see. What kind of — who do you see coming in the market, what's coming in the market, how much capital is chasing these assets? Because I talked to somebody recently: "Hey, KKR's coming back in," you know, a lot of big money. Are you seeing the same thing? Kevin Cuff: Yeah, I mean pretty much. Any core fund, any of the big private equity type shops — they're all kind of coming back into the market. The last three years it's been, maybe a few of them have been in while a few have been out. I think as we get moving on into this year, I think pretty much everyone will be back, probably by middle of this year, is our hope. I think we've seen some of the REITs have not been as aggressive in the last couple years chasing deals, but I think we're starting to see them come back into the market. So in all, I think we're looking forward to a pretty good year activity-wise, with most buyers being actively in the market at this point. Chris Berg: So what are you seeing in the market, and/or what do you think, for example, a KKR is seeing in the market that's bringing that capital back into storage? Kevin Cuff: You know, I wish I had a good answer for that. I think storage in the last 10 years has been a growing asset class for all of these big funds. I think in the last, call it, two to three years, they've all gotten bigger allocations towards self-storage, which I think has helped pricing obviously. But I think it just kind of goes to the fundamentals of self-storage as you look across other asset types and how it's performed historically — that all of these big groups now want kind of their piece of the pie. Chris Berg: What do you think is the biggest threat right now in the self-storage business? Kevin Cuff: I mean, the last couple years it's been interest rates, right? We're not immune to rising interest rates in this market. I think that's been kind of the biggest hurdle that we've been facing. California has a new bill that I think they're trying to get passed this year that limits rent — it's a rent control bill. So certainly there's always different things that the state or federally that they could try to throw at you. But I think in general, as we've been in this higher interest rate environment for longer, it's just kind of letting the dust settle and figuring out where we are and figuring out a path forward — which, it feels like we're through all of that now. Chris Berg: Yeah, I'm curious what makes you say that, because it has frozen the housing market, as we all know, which is a big component of self-storage. So I was going to ask you that: do you feel like we're at and/or near the bottom of rental rates in storage, or is there more room to go down? Kevin Cuff: It's hard to say, honestly, Chris. I mean, you and I talk about it all the time. That's a hard thing with storage right now — it's hard really to pinpoint where rates truly are. We focus mainly in the California markets, and when you're looking at core markets in California, and you have real in-place rate data, rents are still really strong, right? As you go across different markets in the US where there's maybe more supply and less barriers to entry, then rates have struggled a little bit. So it's hard to say, is there more room to go down, because sometimes we don't really know where rents truly are. Certain pockets definitely have seen new supply come in and rents have gone down. Certain other pockets, especially in California, it seems like rents are still performing really well and going up. So it's hard to really pinpoint. Chris Berg: I'd like to keep this more focused on California, or at least the West Coast, if we can. So are there any particular cities, communities, areas that you're like, "You know, this has got me concerned a little bit as far as self-storage"? And also, on the flip side, are there any communities, cities, areas you're like, "Hey, these are some really good up-and-coming areas — if I was in Abernathey's shoes, I would be looking for some dirt to build there"? Kevin Cuff: Yeah. I mean, I think as you look in California, any of the major markets, especially in SoCal, are largely undersupplied, right? So I don't think you can really go wrong with anywhere in California — I guess let me rephrase: I can't really go wrong in any of the major markets. The one thing we are a little concerned — or I don't know if concerned is the right word, but something that people are talking about right now — is the state of emergency in LA, and how that will increase rates going forward. But LA is such a strong storage market, if you can find anywhere to build there, you're bound to do pretty well. Chris Berg: Any secondary, tertiary markets that you like? Kevin Cuff: You know, I like them all, Chris — I'm a broker at the end of the day. But no, I mean, as I look across California: San Diego is a really strong market, it's really hard to build down here. Orange County is very tough to get into, very tough to build — for guys like you that are looking for dirt and trying to find new markets, that's a good one to target. Inland Empire has seen a ton of growth, I think we'll continue to see a lot of residential growth going forward — that's a strong market. We're working on some stuff up in the Bay Area right now, both East Bay and kind of San Jose — those are really strong markets. As you get up into the peninsula and San Francisco, obviously that's an area that's really tough to build in, so if you can find anything up there, it's got to be a target on your list. And as you get kind of north of San Francisco, those markets are performing really well too, and also really hard to get stuff entitled up there. And Central California — you've got a couple sites going in Fresno, I know, as well. Those are strong markets that historically haven't seen a ton of new product come in, so could be some value to unlock there as well. Chris Berg: Yeah, I think it's fascinating, because clearly we don't want any more people coming into California — but that's the thing, it's really, really difficult to build here. But as you stated a moment ago, if you can get it done, those assets typically turn out to be pretty darn good assets, because it's such a high barrier to entry. So anything else you want to add or share that I'm not asking yet? Kevin Cuff: No, I think that about covers it on that one. Chris Berg: Yeah, I think I like what you're saying, because we look at some of the other states and we're like, hey, you just can't build there, it doesn't make any sense with where construction costs are right now. I guess one thing I would ask — and I don't know if you've got any expertise in this, but I'll ask it anyways — is just your thoughts on what happened in the Palisades and Altadena and surrounding areas with the fires. The chatter that I'm hearing is concern about, obviously, construction costs, and if you're going to be building two, three years from now, where are you going to find the subs and things of that nature. So any thoughts, comments on that? Kevin Cuff: You know, I guess my only thought is that it'll be interesting to see kind of how all that plays out. I think the Palisades — there wasn't much storage over there, right? But obviously that impacts the rest of the county. Obviously a horrible event that happened there. I think for storage reasons it will be interesting to monitor those markets and how long the state of emergency stays in effect, right? Because I think that limits how you can operate a property, and there's just more red tape with that. And so I think that's probably the biggest thing on the storage front to pay attention to going forward — and especially as you're an owner, an operator: how do all of these sanctions, I guess for lack of a better term, affect how I operate my property? Chris Berg: Speaking of that a little bit — how concerned are you about a lot of the moratoriums you see cities putting on storage? Kevin Cuff: Yeah, I mean, you probably know better than I do, right, living in the development world day to day — how hard it is to get things built. I live in San Diego, so I know firsthand some of the moratoriums they put in down here essentially eliminate probably half the county on where you can build storage, right? So that's part of the art of being a storage developer, is trying to find and unlock these sites kind of underneath the city's nose a little bit, I guess. Chris Berg: Yeah — or you just beat your head against the wall trying to do a rezone or something of that nature. So, Kevin Cuff, we appreciate it. I guess anything else you want to add or share, maybe with some of your upcoming potential listings? Or, you know, we obviously like the Palm Springs site — anything you want to add there? Kevin Cuff: No, I mean, I think I appreciate you having us on. We're excited — we haven't got to do a deal together yet, but I know we're working on a bunch of stuff and trying to make some things happen. So I think as we get going into '25 here, should be a lot more deals for us to work on. Chris Berg: That's music to my ears, my friend. Kevin Cuff, Cushman & Wakefield. I guess also, how can people get a hold of you if they want to reach out and do some business with you? Kevin Cuff: Yeah, so happy to chat with anybody if you want more details on the deals that we've sold recently or some of the stuff we're working on. Chris, I don't know if you can link my email, but it's kevin.cuff@cushwake.com. So happy to chat with anybody at any time. And here's to a good 2025. Chris Berg: Boy, amen. Kevin Cuff, thank you for the time, my friend. This is the Self Storage Report. — END OF TRANSCRIPT —