Real Estate

Hines & Trez Secure $108M for DFW Self-Storage Amid Boom

Hines and Trez Capital secure $108M for DFW self-storage, signaling booming market demand amidst economic growth.

By Tal Alexander

5/15, 13:34 EDT

Key Takeaway

  • Hines and Trez Capital secured a $108M loan for a 13-property self-storage portfolio in Dallas-Fort Worth, indicating strong market demand.
  • The financing from New York Life Real Estate Investors includes a five-year, fixed-rate loan with interest-only payments and prepayment flexibility.
  • DFW's self-storage development is booming, with over 2.6 million square feet expected by year-end, despite normalizing vacancy rates and dropping average rents.

A Surge in Self-Storage: Dallas-Fort Worth's Booming Market

In a significant move that underscores the burgeoning demand for self-storage facilities, a joint venture between real estate giants Hines and Trez Capital has secured a substantial nine-figure financing deal for a portfolio of 13 self-storage properties across the Dallas-Fort Worth (DFW) area. This $108 million loan, facilitated by New York Life Real Estate Investors and JLL brokers, highlights the asset class's growing appeal, particularly in suburban locales such as Wylie, Carrollton, Lancaster, and Duncanville, as well as urban centers like Dallas and Arlington. The financing arrangement, featuring a five-year, fixed-rate loan with interest-only payments and prepayment flexibility, reflects the lenders' confidence in the self-storage market's continued growth.

Expanding Footprints Amidst Rising Demand

The venture between Hines, a Houston-based powerhouse, and Canada's Trez Capital not only capitalizes on the current demand but also strategically positions them for further expansion within the DFW region. Hines' development of additional self-storage facilities in Frisco and Garland, as part of its self-storage development program initiated in 2018, indicates a bullish outlook on the sector's prospects. This expansion aligns with broader trends in the industrial market, where self-storage development is experiencing a notable boom. With DFW poised to witness its largest-ever delivery of self-storage developments by year's end—adding over 2.6 million square feet to the region's stock—the market's dynamics are rapidly evolving.

Economic Growth Fuels Self-Storage Demand

The DFW metroplex's economic resurgence post-pandemic, marked by robust job creation, retail sales growth, and a series of high-profile corporate relocations and expansions, has significantly contributed to the heightened demand for self-storage facilities. Analysts from Marcus & Millichap attribute this surge to the over 80,000 people expected to relocate to DFW this year, underscoring the critical role of continued migration in sustaining demand. However, they also caution that the market's vacancy rate is normalizing, with average rents anticipated to drop to $1 per square foot for the first time since 2021, signaling a potential shift in the market's trajectory.

Navigating Market Shifts

The joint venture's strategic move to secure financing for the self-storage portfolio not only leverages the current market conditions but also anticipates future shifts. The emphasis on suburban and urban self-storage facilities reflects a nuanced understanding of demographic trends and consumer preferences, positioning Hines and Trez Capital favorably within the market. However, the anticipated normalization of vacancy rates and rent adjustments presents a complex landscape that will require adept navigation and strategic foresight to capitalize on the sector's long-term growth potential.

Street Views

  • Marcus & Millichap Analysts (Neutral on DFW self-storage market):

    "The Metroplex’s economy has soared following the pandemic, with local job creation and retail sales growth ranking among the strongest in the nation, backed by a number of high-profile corporate relocations and expansions... More than 80,000 people are expected to relocate to DFW this year, and that continued migration is what keeps self-storage demand high... ​the market’s vacancy rate continues to normalize this year."