Deca Cos. Secures $45M for San Francisco Storage Project

Deca Cos. has secured a $45.2 million construction loan for Extra Space McKinnon Avenue, a 1,600-unit self storage project in San Francisco. A partnership between Affinius Capital and Axonic Capital issued the first-mortgage note. The future facility will function and be managed under the Extra Space brand.

The deal marks one of two self storage developments approved in San Francisco since 2002. The metro’s administration prohibited the development of new purpose-built self storage facilities in 2006, as a result of an update that eliminated storage as a permitted use in most districts, a representative for Axonic Capital told Multi-Housing News.

The Deca team identified a zoning technicality in the San Francisco’s southern industrial area and secured entitlements for the project, according to the same source. In September 2022, San Francisco removed the IPZ overlay, closing off future development opportunities. As a result, the current project is expected to be the last new self storage facility entitled in the city for the foreseeable future, the spokesperson added.

A constrained self storage pipeline

The area offers about 24.1 million rentable square feet across 405 facilities, equating to roughly 2.8 rentable square feet per person for its 4.7 million residents, nearly half of whom are renters, the Axonic Capital representative also pointed out.

The future 175,000-square-foot facility will be at 2270 McKinnon Ave., Commercial Observer writes, near U.S. Route 101 and Interstate 280. The Class A development is slated to rise five stories and feature fully climate-controlled and drive-up units, ranging from 15 to 270 square feet. Other amenities will include RV and boat storage, a parking area and gated access, Yardi Matrix information shows. Talonvest Capital Executive Director Kim Bishop arranged the financing.

In the past decade, the submarket in which Extra Space McKinnon Avenue is located added only 240 units, accounting to 0.9 percent of existing stock, “all through expansions of existing facilities rather than ground-up development,” the same source from Axonic added.

While occupancy is projected to remain at 92.3 percent through 2030—close to the 92.8 percent figure registered since 2020—rents have increased 5.6 percent in the last six years and are expected to see a 2.9 percent annual growth in the next five. The 18 climate-controlled facilities within a five-mile radius of Extra Space McKinnon Avenue amount to 519 rentable square feet, “with no further projects planned, permitted or under construction.”

The national self storage pipeline

As of October, the wider Bay Area registered 41 self storage properties in all stages of development, according to the same data provider. The under-construction pipeline included only three facilities, set to add 278,604 rentable square feet to the area.

Nationwide, September saw 2,969 self storage properties in all stages of development, out of which 702 were under construction, amounting to 52.5 million net rentable square feet and accounting for 2.6 percent of total stock, according to the latest Yardi Matrix self storage report.

This year’s activity across the U.S. has brought forward several emerging self storage markets, many of which are located in the Sun Belt, more specifically in the state of Florida. At the top of Yardi Matrix’s top 10 list is North Central Florida, with more than 12 million square feet of total stock and more than 1 million square feet under construction.