SBA 7(a) Self Storage Feasibility Study in Texas

Texas leads self storage lending, with moderate loans

Texas ranks first among states on count of 7(a) self storage loans, though storage holds only sixteenth place on Texas's list of 39 classes. Texas shows 185 storage loans for FY2017 to FY2026, worth $299.0 million. The median is $1.1 million, 1.18x the figure for storage borrowers elsewhere, and the middle half runs from $614,000 to $2.1 million. Franchising is minor at 5.9%. The loans fit conversions of existing buildings, small facilities and acquisitions, while large ground-up developments tend toward the 504 program.

Two specialist lenders

Live Oak Banking Company appears with 70 loans and $145.2 million, and Bank Five Nine with 38 and $48.5 million, together well over half the file. The Huntington National Bank has 8 loans and $11.8 million and Plains State Bank 6 and $10.8 million. Storage borrowers in Texas will largely meet lenders with deep experience of the class. The table counts portfolios, not requirements.

Houston and the coast

Harris County has 31 loans, Brazoria 11, Montgomery 10, Dallas 8, Galveston 7, Bexar and Denton 6 each, Collin 5, and Aransas and Comal 4 each. The Houston area and the Gulf Coast carry the record, with Dallas and San Antonio less prominent than their size would suggest. Approvals leapt to 46 in FY2021 from 18 in FY2020, then returned to between 11 and 20 a year.

Outcomes

Storage approvals in Texas lapsed at 12.1% or more across FY2017 to FY2024, identical once undisbursed loans are counted. For the 90 loans disbursed in that span, the charged-off share is 1.1% to date and the same 1.1% for the first five years. Both are minimums. They are low, and they say storage has held up in Texas.

What the class covers

The data offers no way to tell RV and boat storage from self storage, because such lots sit in the self storage or the warehousing class, so some of the 185 loans may have financed vehicle lots and not climate-controlled buildings.

What a Texas storage study has to test

Supply is the first test: the square feet of storage per household within a few miles, competitors' rates and occupancy, and the pipeline of new facilities. New competitors can appear quickly, so the study should look hard at what is planned nearby. Land cost, construction type and the share of climate-controlled units drive cost against a $1.1 million median. Lease-up is slow, so repayment should be shown on a gradual fill. Rate increases on existing tenants can lift income but also cause move-outs, and the study should treat them with care. The appraisal will rest on net income once the facility has filled.