Cold & Self-Storage Construction Trends: Consumer Preferences, Tertiary Markets, and Technology Investment Will Make the Difference in 2024

Monday morning, it's a bit of a cold dreary one here in Dallas, Texas, but don't worry. We're bringing the sunshine here today on our roundtable discussion. Folks welcome to another episode of experts talk. This is Marketdale's premium debate and discussion roundtable where we sit down with the top voices in your industry to break down the top tech trends. Technologies well, I already said tech, but tech again and again. It's always tech and timely new that are shaping your industry. Again, we sit down with the top thought leaders in your industry to pick their brain and get a pulse for what's really happening what matters and how we can get actionable with strategy. I'm your host Daniel Litwin, the voice of b to b. Folks, thanks so much for joining us. On another episode of experts talk, make sure that as you're tuning in to today's discussion that you head to market scale dot com. Again, that's market scale dot com. For, not only previous episodes of experts talk. We have our full show page on there with all of our previous, quick little sound bites, as well as full round tables. Covering everything from, hospitality, food and beverage, IoT, you name it a real plethora. But also go to market scale dot com for more expert thought leadership. We're always platforming voices like yours, and there's plenty to say on plenty major trends and technologies shaping each of our industries. Alright, folks. Let's get into it. We have a juicy one today. Today experts are gonna be talking the construction and more specifically, we're gonna be exploring major trends from the self and cold storage construction verticals from twenty twenty three to get a pulse for how those are gonna carry over into twenty twenty four. So both self storage and cold storage saw a lot of energy, in the construction industry in twenty twenty three. There are a lot of macro trends motivating that. Right? Self storage experienced a major supply craze, I guess you could say, a lot of build outs in twenty twenty three, and existing facilities saw rising and rising occupancy rates. We're gonna break down the macro trends behind that. On the cold storage side of things, we saw major demand soaring for cold storage infrastructure across the United States due to rising, e commerce proliferation, and so strain on the supply chain that now needs to be met with advanced top of the line cold storage facilities. But again, we're getting into the construction side of this, right? What did it really look like on the ground for our construction pros? Was there as much craze as some of the headlines were saying around cold storage and self storage build outs. And again, are the trends that motivated those builds going to carry over into twenty twenty four. More broadly, how do both self and the cold storage segments of the construction industry fit into a larger strategy for new build outs and new projects in twenty twenty four considering some of the macro trends, whether that's, supply chain bottlenecks, always a new one it seems, every month, something fresh, or, whether it larger trends around our macro economy, with interest rates maybe coming down in the next few months, fingers crossed. How's that gonna impact home buys and potentially, you know, more pressure on the housing market. Therefore, maybe more self storage. We'll see We'll unpack it all today, and we're gonna hear from the experts themselves. So let's go ahead and let the experts talk on experts talk. I'm pleased to welcome our panel of pros who are gonna give us that pulse check on major trends in self and cold storage construction I'm pleased to welcome our three panelists. Hello, everyone. Let's go ahead and go down the line. Get everyone a little welcome. We're we're joined first today by Chris Tatton He's founder and president of DC materials. He's a board member for the structural building components association. He's gonna be giving us a pulse on how self and cold storage fit into a larger ends of the construction industry. Chris, great to have you on. How are you doing? I'm doing well. Thanks, thanks for having me. Absolutely. Real pleasure getting to pull your perspectives in today. We're also joined by mister John McAfee. He is treasurer of the Texas Self Storage Association. He's also an owner and asset manager at the storage place He's also owner and president of BG Williams, asphalt, dirt work, and concrete. John's gonna be our major voice for the self storage industry today. John. Great to have you on. How are you? Hey, Daniel. Thanks for having me. Absolutely, man. Thanks for joining us. And last but not least, we're joined by mister Corey Singer, Vice president of business development and pre construction at FCL builders. FCL builders is gonna be given us the cold storage slice of the analysis to today, based out of the Atlanta area. Corey, how are you doing today? Good morning, Daniel. Thanks for having us here today. Absolutely. Well, real real pleasure again getting to sit down with the three of y'all. We have a nice, you know, variety of slices of market here. And, obviously, we're gonna have some pointed questions to each of y'all, on your different market verticals. But beyond that, I'm excited to some of the crosstalk and how trends impacting one side of the industry are being reflected in others. So folks, we're gonna go ahead and open on a crosstalk note here and get everyone chatting. Let's just reflect on twenty twenty three trends at large. Plant your flag on what kind of year twenty twenty three was for the construction industry and your slice of the construction industry. How would you grade it? You know, what what would be your take? Whoever wants to jump in first. I can I can give it a As far as expectations against reality, I'll give it a nine? I think I think twenty twenty two, I've always had such a fantastic year. We all thought that there's no way that this can continue. It's gotta fall off. Everyone was prepared for serious slowdown, and didn't see that happen. We didn't have the kind of year we had in twenty two, but, twenty three was good for us. I I think there's there's plenty of work out there to be done still. I would agree. I thought twenty three. I mean, twenty three is one of those years that, you know, you you dreamed about years before that. Right? I mean, it was great volume and expectations in the market and and a whole lot of demand. And at the same time, it was kinda one of those years your mom warned you about too because everything was hard, you know, from labor to, materials, to timing on, on, and managing your general conditions. I mean, it was just a It was a challenge, like, we haven't had to see before as it relates to meeting market expectations. And at the same time, the demand was a short So, kind of a tale of two worlds, for the whole year in general. Yep. I I agree with all of what you just said. I think the the stuff that happened in twenty three is stuff that started being talked about in twenty one and twenty two. And then it started to be completed we found that it took longer, to do just about everything. All things were more expensive. So when you get down to the end of twenty three and you look at the on from a self storage perspective, the declining street rates, and things like that. It was a little bit of a pucker factor of oh, did we jump too far? But I think the reality is is that we did not, and it's always one of those. If you build it, they'll come, do it conservatively. I think that, yeah, we're excited about twenty four, but we're also, let's, let's eat what we've just killed. And, that's where we're at right now. I think one of the neatest things about twenty three is when you look at the results from twenty three. You look at the end of the year. And I'm speaking really just more on the e commerce side, the warehousing side. I know we're here for for self storage and cold storage. But just from that to simply because it's it it draws in so much volume in the industry. You know, you you we finished twenty three with on a national basis around five per vacancy across the country. And rental rates were still up fourteen percent. So we're not dealing with those situations that we saw, where you had a a huge decline in demand in years following because there was an overbuild scenario. Clearly, there's a whole lot of market demand for it. Ninety five percent of it is absorbed. You know, those things are are really encouraging. So to me, that that's really the highlighted twenty three is just is the numbers that ended the year showing that, regardless of what was built in in nineteen through twenty three, the demand was there, so we're not sitting with a huge excess amount of inventory nationally and waiting for it all to get, get get leased Alright. So let's get into some of the specific, verticals, obviously. So we'll jump to self storage. So we'll turn to John first on this one. Again, a lot of the reporting around self storage in twenty twenty three was there's a supply craze. Right? As of July of twenty twenty three, I know that's several months removed now, but, sector supply at that point was booming. There were around five thousand self storage properties under development nationwide. And I'm curious if that scale of new build out looked the same on the ground for you and some of your colleagues at the TXSA. Right? Did y'all experience this kind of supply boom in twenty twenty three? On how did it stack up to energy and other construction sectors? Yeah. No. I think that, there was a lot of new supply that was added. I think the improving the technology is a big deal. And as a result, you've got, bigger facilities that are being built. They have more amenities. And, it it certainly pushes and, tightens the market. From a competition perspective, the new properties that are coming online, how they're going to price, themselves to make sure that they fill up faster. If you if you're an established, facility, and you've got a new facility that opens up down the street, they're gonna price it so that they get all of the business. And that's a real challenge. You just have to be able to, sustain and hang on to. So beyond that, then, you know, if look at, for example, high occupancy rates. A lot of the reporting around self storage too was that major reason why we needed to just build out new supply in the first place is because the current existing infrastructure wasn't keeping up with the demands. I think that all of the high occupancies that you're talking about, the ninety, ninety five percent range that was the stuff that was, happening in twenty one and twenty two. And as a result of that, we plan for the expansion and, the new builds and things like that. And now as a result, you've got, a lot of the demand is now coming online. And as a result, the occupancy is is being driven down. The rates are going down, people that are wanting to maintain a stabilized occupancy or they're trying to get to stabilization. The rates I've seen in some markets are being slashed thirty percent. So there are some real things that are that are keeping people on their toes. But the reality of the of the self storage industry is rock solid. If you build a good product in a market that needs what you have, and tell yourself the truth, do some real research, and make sure that what you're bringing into a market, the market needs and is willing to pay for. Well, let's jump over now to cold storage. So, this one, obviously, for Corey to start, cold storage demand over the last several years, and really with an uptick since the pandemic. You know, we has has been trending up. And there's been more pressure and a desire for cold storage. I wanna lay out some stats here real quick. So from twenty nineteen to twenty twenty two, cold storage development skyrocketed as a segment of the construction in q two of twenty twenty two, there were three point three million square feet of speculative cold storage development underway. Compare that to twenty nineteen, there were only three hundred thousand square feet. So that's that's a huge, big ups. So get a pulse. Did that continue into twenty twenty three? Same kind of energy, and what did you see on the ground, Corey, in terms of new builds and cold storage? Well, sure. Yeah, there was a a huge increase in speculative cold at during that time frame. And, but there was still a significant amount of build to suit cold that was being done prior to that. So it it is not like we were looking at a market scenario with demand of a half a million square feet in one year and then nearly four million square feet or three and a half the following It was really broken out by build to suit demand. And then, the market realized that really for the first time, there was a speculative cold storage opportunity that had really never existed in cold before. We were fortunate enough to build the first cold storage spec ever in the United States. It was in it was in Dallas, Fort Worth, and a very successful project, but that was the first one of any scale. On a on a genuine true, cold storage spec building. But the demand itself, even though it was, you know, highlighted by COVID. It was impacted by COVID to a certain point. The the discussions about a impending or, you know, evolving demand in cold story, even from a speculative side. We're, those those talks, in forecasts were coming long before COVID and driven by, you know, a whole bunch of different scenarios. You know, but I would I would throw them underneath three different categories. You know, one is changes because of passage of time. The other is changes because a movement of food, is shipping of food, and the other is changes because of expectations. So you have a a population shift in the country in general from north to south that has impacted a demand for cold storage in a significant way. And but those people and really, you know, just in general, these these trends across the country, related to fresh food. And and prepared food are changing the kind of facilities that are needed throughout the nation to, to supply that. So you're gonna need a significant amount of square footage in just about any market to to meet the demands people have for fresh and prepared foods compared to you know, more processed foods and those kinds of things that the market was, you know, used to in years past. You have a passage of time issue finally, the antiquated cold storage facilities that are are throughout the country have just kind of all caught up to, you know, their reasonable, you know, likelihood or not, sorry, their reasonable livelihood and their their ability to just still, make sense from an economic standpoint. So you have a replacement thing that's going on that, you know, on product that was built anywhere between fifty and a hundred years ago. And and then the third big factor in this is the way food moves across the country, you know, with the the widening of the Panama Canal with more, shipping of produce and and other, foods from Central and South America. Significant expansions in in ports all the way from Miami up the East Coast through Savannah and Charleston, even in New Jersey, you're seeing such a different way that food enters the United States instead of, and maybe this is, you know, one of my old or overused examples, but instead of the the banana coming into the port of Long Beach in California, going on a train to Chicago, sitting there for a week, and then finally making its way to Atlanta and the southeast nine days later, you know, all of this is shifted and it's going east and and north versus, on the west part of the country and and then going, eastward. So it's just a a massive shift in the way the way foods are prepared, what what customers expect from their foods, even entertainment venues in the way that they need, food. Overall storage demands where populations growing and a very significant way that we move food into and around this country. Has created a demand that, some in the market believe is gonna meet or exceed a hundred million square feet over ten years. You know, that is huge difference from what we looked at. Prior to, you know, eighteen, nineteen, twenty. So, okay, let's open it up now to technologies because we we brought that up a little bit in some of our answers here, and I wanna toss it over, to Chris to start here. Because I think a pulse on how on how the average, I guess, consumer or citizen today in the US, understands and sort of demand services out of their day to day. Understanding how that's happening in sort of the residential slice is gonna make more sense for how that's proliferating over into some of the visibility that larger commercial outfits need in their cold storage operations as well as you know, some of the integrations and, you know, technologies and services that are needed in self storage too. So really what I'm teasing out here is let's get a pulse on modern features and integrations that we're seeing in new build outs today. Chris, if you had to summarize some of the, you know, sort of connected living style technologies or any other sort of modern features and integrations in new build outs. What are you seeing on the ground, in your slice of the construction industry? And then we'll open it up to everyone else. Sure. Well, so I'm I'm mostly multi family. So apartments, new construction. Yeah, it's it's far as all that goes. Obviously, obviously, we're living in a much more connected world these days. I I, you know, I I don't, the way I purchase, the way that consumers purchase, obviously has changed more and more. And as we get busier and busier, you know, the need for cold storage is definitely gonna be there. Products on demand rather than coming through a Walmart or a or a grocery store. It's a lot easier for me from my couch to open up my phone and order the things I need. So definitely seen more of that. Yeah. Yeah. And it's interesting too, right, how essentially the convenience of the consumer all the way at the bottom of that supply chain, at the end of that supply chain, I guess you could say. Ends up motivating this mass need for things like cold storage and self storage, both. So I wanna open up to some crosstalk here between the three of y'all, but based on what, you know, we've kind of now internalized as consumers over the last three years of of modern conveniences, and some of the trends that we see in terms of integrated features with, you know, fun appliances or day to day conveniences in our in our lifestyle, in our day to day, how is that being reflected in self storage facilities and cold storage facilities in terms of, you know, data and analytics, creating visibility on operations, that feeding down to the end user, or that feeding across to businesses for more supply chain visibility, Go ahead and break it down. What what are y'all seeing? For from the self storage perspective, the the consumer, I think, has been kind of reeducated over the last number of years, whether it be, comfort with Airbnb, being able to go to some strange house and have an electronic lock that lets you in. The self storage industry is moving, I think, towards the electronic lock system. We've got about five thousand three hundred units, on storage for us, fifteen properties. We just built a brand new property that was one hundred percent. No key. And no key is a lock system that's electronic. It's an app that you have on your phone. It takes people a hot minute figure it out. But once they do figure it out, it's really easy. And the simplification, for them as a consumer to use as well as for me as an owner to be able to manage the property more effectively and efficiently to your point getting the data analytics find out who's coming and going and how often that helps me with rate increases. So the things like that that are making our lives easier, are are really moving to the front of what we're planning in terms of future acquisitions, future expansions, all of those kind of things. You know, on the cold side, I mean, there's certainly advancements in technology and refrigeration that are impacting, you know, who how, how people develop a building and and really what even some managers and owners prefer as far as their you know, there there there's some preferences in in refrigeration in in its, in its equipment. And it's usually among a manager and owner, it's their desire to have a consistent platform, kind of like the Southwest Airlines mentality that we're only gonna owner manage these types of planes. And the same thing here, so some only want a free on system or some only wanted a light ammonia system. Whatever it may be. That stuff maybe is is interesting, but not necessarily for this, for this call. The technology that's really driving the the part of the growth or part of the demand in cold is it is more of what Chris was talking about. It's just your ability to buy your food wherever you are. And then have it delivered to you. So it's really, you know, it's in a sense outsourced technology that's impacting the way that, that we buy food and the way we buy about anything. And then, and therefore, changes the demand on the actual, facilities needed to supply it. That in, and I, I don't know, on this is my personal opinion to some extent. But I also see because there's such a demand in fresh food. In addition to prepared foods. You have you have a mix of, like, what we were just kinda talking about here. You have you want an ease of life style, you won't be able to sit and order it here. And at the same time, you know, there's certainly a growing trend among many and a deep healthier. To buy foods kind of an adjust in time, scenario. So they only are buying what they're cooking that day. So what's interesting is while people are seeking, easier ways to get their food. They're applying more work to it on the back end because more are cooking or preparing those fresh foods that were delivered instead of those were that were previously frozen, or were, more processed foods. Alright. Corey, do you see, excuse me, Daniel. Corey, do you see an opportunity for self storage owners to either expand their self storage properties adding the cold storage we're taking, you know, existing storage facilities, in in converting some. And I guess the question there is is how big of a footprint does somebody need to have for you to be able to start a cold storage operation? Is it fifty thousand square feet? Is it a hundred thousand square feet? What do you think? Well, this is the square footage has everything to do, right, with Like, what is what's the use for it? Is it a just in time kind of fulfillment thing? Are you using it more as a public refrigerated warehouse where someone is renting space within your larger warehouse to deliver foods. The the demand or what the what the use is will help drive that. But the real question there is you're asking about size. I mean, we rarely work on a facility that's less than fifty thousand square feet. Today, you're seeing specs that are growing. You know, one fifty was, you know, kind of the normal or, the average expectation on the spec side. There's a number of the day that are going a lot larger or they're going a lot taller. So they're investing in more of that. As far as converting an existing facility to a coal building, that's a whole another, that's a purely a whole another conversation because You really you almost need to disassemble the building. I mean, you have such a different kind of flooring system and structural system that's necessary for it. That, starting with that kind of building as a basis would be, that'd be pretty hard. You'd you'd virtually be starting from scratch. Got it. I'm curious, Corey, how things are for you on supply chain on electrical components? Are you seeing electrical components set the beginning of your schedule for these new builds? We have no problems. Everything is wonderful, and we have no challenges as sorry. This is a choir. Wire. You know, we things are things are a lot better today. However, it is still really a challenge on switchgear. It's it's still a big challenge on on those components In fact, you know, it it can be so frustrating when you have a a seventy five million dollar facility that's being held up for a twenty five thousand dollar box. It it just kinda makes you wanna lose your mind. We order those as fast as we can. We have, some pretty, solid relationships where we've been able to at least reduce the delay. Others have had, but it is still it's still a challenge out there today. You have to be all over that really early. So you're on the back end, your customer doesn't have a necessary delay. After everything is is built and you're ready to turn it on. What what do those ownership groups look like on the side, is that, I mean, is that people who are moving over from other kind of real estate ventures and kind of discovering it, or is it sort of this group of people who've been around it for a long time. Snatching it. Actually, that's a that's a great question. I'm gonna make a joke on the answer, but as of eleven twenty eight Eastern today, that's how fast changes. You know, here's here's my answer. You have the answer is yes. I mean, you have capital groups that are long and established in traditional warehousing or e commerce. Product that are are are moving into that side. You have developers that have been, very experienced in the ambient side, their whole careers, and now are are jumping into that. Expansions in, existing cold storage companies that were, you know, that are enjoying an influx of capital that are able to really double down and go big. And a whole group of companies that didn't even exist a few years ago that are developing and or capitalizing these projects at a very high level in in in a in a huge sum but if you look behind the curtain, even though the companies are new, you know, the people behind them have decades of experience in this. And in quite a reputation in the industry. So it really honestly the answer is all of that. You know, it is it changes that much today. Corey, what do you find in is the, cost per square foot to build the cords, cold storage ish. Well, ish. Okay. Alright. Well, you know, of course, you know, where, right? What, the the geographic, locality is gonna make a big impact. The overall size is gonna make a bigger impact. And then, you know, everyone here understands, you know, how site work can impact that too. But if you're just looking from the the facility up, you're gonna I'm gonna give you a big range because there is a big range. There is a significant range as far as it relates the kind of refrigeration equipment you've chosen, the height of the building, the kind of fire suppression system you need in that facility. And on top of that, the structural components to it because you're dealing with a lot of extremely heavy overhead, machinery that that needs quite a structural system. So with that in mind, in a million variables, you know, you're over two hundred dollars a foot, and I think you're gonna cap out in that two sixty or seventy range. Unless this is gonna be a, you know, eighty to, you know, hundred foot, you know, rack supported cold storage facility. And this is to kind of a level, but I don't think anyone here is talking about that. Yeah. Okay. So I'm I'm gonna jump things over to Now, you know, if we had to apply some learning lessons from this, you know, hype around new self storage supply, you know, major market pressures that are encouraging build outs of cold storage, you know, in the process of meeting that kind of demand for supply. You know, what did the larger construction industry learn from those pressures. Right? So I turned to things like maneuvering the materials supply chain. You know, Chris did a great job of highlighting that us. Again, obviously, there's there's always some new node on the supply chain that's adding a little pressure, whether it's electronics, components, or just larger you know, building materials, seeing some flux and availability. We've also, you know, seen Over the last several years, new and improved construction methods and with cell storage specifically being, you know, such a modular style of construction and build out. I'm curious if we saw, you know, meeting the supply craze, highlighting the power of, for example, modular construction strategies and prefabrication to meet the supply, you know, in a much time fashion. Let's go ahead and just open up discussion there. You know, if if we had to look at what worked and what worked well for meeting that supply craze, What can the larger construction industry learn from that? Well, I think, I think I think there's a there's a major trend in construction in general. Everyone wants to talk about modular volumetric. What the next big thing is gonna be, and most of that relates to the housing crisis and how are we gonna get more houses for more people, so I sort of there's this general feeling like somebody's gonna come up with something And one of these systems or one of these solutions is gonna be the way we build in the future. And I I I don't tend to totally jump on board with that idea, but I think that the modular people, the off-site people are putting pressure on me to more little more traditional guy to look at different new construction techniques and different opportunities. And so I think over the course of the next twenty years, we're gonna we're gonna be seeing a major change in the way things are constructing. Especially when you talk about self storage where there's a lot of repeatability, a lot of the same one after another, and you see it in hotels a lot of the modular guys are getting into that where you're just stacking one hotel room on top of another, self storage is is perfect for that. It's it always with those solutions, it always kinda comes out to a numbers game. And the numbers tend to work if there's a solution close to the construction site. Yeah. A couple of new things that I've seen, and and, again, I I agree with what Chris is saying. I think that we're trying to get creative. But self storage in in its in its nature is a simple business. The buildings are simple. We're not dealing with, you know, as many life and health and safety issues, you know, want access. But in terms of a new construction technology or or method, I have seen, three d printing is something that someone's trying. I've looked at it and because of the size and scale of the walls and the thickness and things like that. It reduces your net rentable square footage. So I just I really question whether that's gonna work it will absolutely be a solid structure. But I I think it's more solid than is required and needed for self storage. Now as you go up and multilevel and things like that, the modular that Chris is talking about, I think, I think that there's gonna be a real opportunity there. But for most of what we have, in the in the suburbs, what the customer is looking for is they're looking for single story, drive up, access, and It's just a traditional metal building. On the on the cold side, we've learned a lot, and I hope we always continue to keep learning. Soon we will. Right? You know, there's there's there's always a new day. But it yeah. So there's a number of things I could I could answer with this or point out and answer, but I think I'd stick with this communication. That when it comes to planning a cold storage spec or really a cold storage facility at all, especially if it's a speculative building. Very pointed clear communication and consistent communication with a customer about how developing these is going to be a very different experience for you than another product unless you are, you know, well experienced on that cold side. The amount of planning it takes early on is significant. That a lot of the decisions that have to be made very early, to ensure you're getting the the equipment and or materials you need when you need them. Accelerates that schedule and the investment schedule from the developer side to get that done too. You know, to your point earlier about, about switchgear or, you know, whatever it is. You know, in in the refrigeration So I I it's this is where you have to be a construction expert, but you also have to be very sharp in your communication skills and about setting the right expectations or someone's gonna be really disappointed. And that early communication lends itself really, really well to finding value engineering opportunities. If if you can if you've got an owner developer who's interested in in working with you proactively. And I'm way more apt to jump on emails and say, Hey, if we do this, we might be able to save some money. Those kinds of things. And I think, you know, the cold storage, sounds like a really great place to be right now. Construction in general with the sort of market pressures that are happening, I think you're gonna see more and more successful general contractors and subcontractors, bringing value engineering to the table just to scoop up the work that does exist. So what I wanna do now is let's look to twenty twenty four. And, you know, as a year at large, I wanna start with Chris here and then we'll jump over to John and Corey individually for y'all's market slice. But if we had to kinda gauge where the energy is carrying twenty twenty four. How would you sort of pulse check some of the trends that we expect to see in, you know, new builds in twenty twenty four, and some of the market dynamics that are gonna impact, you know, let's say everything from availability of supply to, you know, the types of projects that are gonna see energy, Chris, based on your sort of wider lens here in the industry, what are your predictions? Sure. So I'm a I'm a I'm in lumber. I I buy and sell a lot of lumber. Lumber kinda leads on on on what's gonna happen. The broader construction market I I I mentioned it earlier. We're we're under built. We don't have enough houses. We need to build more houses. Whether or not, we need to really depends on the fed and what the fed does this year. I I think they're playing a game that, trying to manage expectations. The easiest quickest solution to getting more people, more places to live is multifamily. So What I'm seeing in my market, and I'm in Wisconsin is when developers are feeling good and feeling like rates are gonna stay the same or be coming down. I I'll pick up five contracts in a month for a hundred thousand square foot plus buildings. And then you get some CPI report that nobody likes, and I don't get a phone call for three months about projects. And so I think housing in general is gonna be moving with the Fed. And in lumber, in particular, we're sort of poised for when that first rate cut happens, we're waiting for things to take off. We're very acutely aware that when interest rates start moving trending downward or people feel reassured that they will that, there's a lot of builders with with a lot of capacity that are gonna stir banging our houses again. And so now if we look over at, each of the core market segments of we're breaking down today, self in cold storage, we'll start with self storage. So, John, I want to highlight One of the, I guess polls checks of the end of the year of twenty twenty three that was looking ahead of twenty twenty four and get your thoughts here. So this is Yardi Matrix's national self storage report from December. Their analysis was we're gonna have stable market outlook, into twenty twenty four and some resilience despite housing slowdowns and varying regional dynamics. And that housing market might impact self storage occupancy and rates. However, there's still set to be some inventory growth even if it kind of level out a bit. So they saw an eight point six percent increase in self storage inventory over the last three years. But there has been some increased project abandonment. So, obviously, great energy in twenty twenty three. Maybe petering Majun twenty four, what do you think? Would you agree with that assessment and where do you see some of the maybe, you know, suppressing challenges and and motivating opportunity for the self storage industry moving into this year. Sure. No. I think that, yeah, I do agree with that. I see the at the tail end of last year with the occupancy going down. I think that we have a lot of supply right now that everybody's looking at saying, how do we fill it up? And so everybody's doing the different things to create more value, to, to fill up what we have. But that does not mean that there's not new projects, that are out there. It is much more expensive to either add to an existing facility or to open a new facility, inside the city limits. Inside the city limits, they put a lot of restrictions on you that are, not necessarily needed in my opinion in the self storage and street. And it just makes it that much more expensive. So I found that there's a lot of people that are like me that are looking to expand their port folio in self storage, that they're trying to go just outside of the city limits or in the the more tertiary markets. So, from that standpoint, it's it's, where you're focused. But for sure on what we have, and the occupancy that we have, people are trying to do the different things to create more value so they can either attract more customers or, justify the rate increases, that we're still putting in place for the existing tenants. Now those rate increases a couple of years ago might have been twenty or thirty percent. Now they're two to eight percent. In increases. So, everybody's, kind of tapping the brakes a little bit, but still foot's on the gas. And now if we look at cold storage, if we look at some a larger trend surrounding, warehouse construction. This might give us some pulse on maybe where we see cold storage, but I know there's two very different market verticals. So, we'll get your thoughts here, Corey in a second. But again, cold storage larger trends based on collier's data said that warehouse construction, was actually declining in recent months, but that this was seen as a healthy market correction because there's a natural sort of balancing of supply and demand after maybe some mass supply, you know, upticks over the last year plus. But that industrial demand is predicted to remain strong for warehousing in general, and they specifically pointed out that there's a lot of energy behind still new supply and cold storage. A lot of this too, because a lot of the existing cold storage facilities that have been around for, I guess years and years and years now, are actually needing renovations. They're needing to be improved to meet some of the strain that we're now seeing on the cold supply chain. What are your thoughts? Going into twenty twenty four, what kind of energy, are we gonna see around cold storage builds? Is it gonna be the same as three and what kind of, you know, again, challenges or opportunities are we gonna see balance out for the market? Okay. Well, you know, that there's an hour talk. Right? Yeah. Literally, I know. Yeah. I know. You get I know. So they're gonna give me sixty minutes. It's gonna be a challenging year. And it it is it's gonna be hard because you have some reverse economic rules that are occurring. You have a lot of demand for cold storage product today, and you still have a significant demand, demand for ambient or dry for no e commerce warehousing product today too. Basically, as mentioned earlier that, well, there's a couple outlier markets in the country where, vacancy has increased a lot. You know, Indianapolis or so. There's a few of those. On a national basis, warehousing is still at five percent or lower vacancy, on a national scale. So you know, smart leasing brokers would say, you know, five percent or less is negative vacancy. The same thing is is even more true on the cold You have almost literally zero vacancy in cold product anywhere in the United States. And for all the reasons we talked about earlier, there's gonna be a massive demand for more cold product, throughout, you know, the next ten years or so. But, you know, there's no surprise that there's a capital crunch today. You have nearly every major institutional lender, that, you know, has their handcuffs on. They're not allowed to really jump into that side because they they managing a lot of, other commercial commercial, loans, commercial real estate loans other than industrial that all have to be revalued over the next couple of years. And you're talking trillions of dollars and primarily in retail and an office product. And that has just completely turned the capital side upside down. So it's just a weird economic condition. You have a ton of demand for this product but it's gonna be real hard to capitalize it, throughout twenty four and then twenty five or whenever this shakes out. You know, that Chris, I heard you a minute ago. I think you were I think I don't put words in your mouth. I think you were kinda giving a nod to whatever the Fed says about lowering rates. We shouldn't expect this big downturn in in twenty four, like they may have nodded to. I agree. I I don't think we have a some big change coming in twenty four. Stabilization helps, you know, but at the end of the day is something has to give. If money is still 2x what it was or 3x, a year ago and land prices have not dropped, and lease rates are still continuing to rise twelve to fifteen percent a year. And construction rates really haven't dropped much either. You know, something has to give to make those new product, that new product competitive to the previous years. We just have to flush this out. It's gonna be a challenging couple of years. And eventually that capital side will flush out because the demand will, over time be so high and that it's gonna win out over over today's problems. But, you know, it's gonna be a challenging year. You know, undoubt I don't think anybody really argues about that. Well, then last question I wanna pose to the three of y'all for a little crosstalk before we close things out here is on some of the macro trends that, are gonna be shaping. I think it really strategy for all of y'all's, segments of the construction industry. And really this big one is, where we're seeing a lot of energy in terms of moving graphics, and for example, sort of this influx of, millennials choosing city living over residential, suburban living. For example, we saw New York. Lead out is one of the biggest markets for not only self storage, but also cold storage build outs in twenty twenty three. Makes sense, as to why both would be needed if we see more people moving into New York. It's not like those are particularly big apartments. You're gonna need somewhere to put all your stuff. And then at the same time supporting this now influx of people wanting, you know, quick service, quick delivery of everything from you know, games and essentials to food, obviously putting pressure on cold storage. But again, if we see a map influx of urban city living, that's gonna put pressure on new multifamily build outs, and maybe, you know, site, some of the supply there in, dense urban areas, and then downstream from that, an increase in more self storage supply and coal storage to help manage this ecosystem of services. So what are y'all's thoughts on some of those, you know, demographic movements across US, and how we should understand them actionably and strategically as construction professionals as we move into this year, you know, for each y'all's market verticals. I can tell you about that. Sorry, Chris. Go ahead. No. Please go ahead. Self storage, the millennials, the ease and access of using your services the millennials absolutely are are plugged in on the apps. They don't want to talk to people. They want to be able to one hundred percent manage their self storage, move in, move out, access, payment, online access, all of that kind of stuff. They wanna be able to do it electronically. And so that's that's certainly a direction that the self storage industry is going to accommodate that. That does not mean that, we have the older customers that may not be as, up to date on the apps and things like that. And they wanna pick up the phone and they still wanna talk to a live person. Certainly that is a differentiator for self storage. And it's it's a core truth that's always been there. The key to success in self storage is answer the phone. So it makes it pretty easy from that perspective. Now the people that are moving to the urban areas the, the barriers to entry for new self storage inside of a, an urban area. Is still very difficult. It's driving the cost of construction of a new facility way, way high. And that creates opportunities for the self storage that is outside of the city. People are willing to drive a little ways. To get self storage at what they feel is a reasonable price. So those are a couple of the challenges that we're having to deal with. With the millennials, with the urban movement, and those kind of things. Yeah. I'm So I'm I'm obviously a very bullish multifamily. I think along with that, it lends itself well to self storage. You know, and of course same with the lifestyle on demand services on the on the demand products. So the the cold storage side of things. I think I think not not only just beyond multifamily, just in single family. Nobody's really doing it really, really well, but I think we need to see smaller houses being built that are more affordable. There's opportunities and build to rent kind of there. But, same kind of thing. Less personal space, more money and time spent on experiences. And so you know, works really well into into both these verticals, I think. Now, you're certainly right. I think people want, There's a there's a group that wants experiences in a lifestyle with their what the money they have versus overhead. And it answered these from what I we're seeing, Daniel, it kind of competing demographic changes too. There's certainly no doubt of, a trend in some areas, millennials and others that are moving into the city. Then you also see a huge increase in, population growth and what used to be second and third tier markets in a sense a lot of your university markets. You know, so towns like Columbia, South Carolina and you know, we can do this forever. You know, but, you know, towns that were that have a good medical system and their Tristy towns, but they're not the super urban kind of groups. They're seeing huge growth into markets like that. And then in general, this, the shift from northern population to southern population, which is driving, a lot of the cold storage, demand that is you know, let's say south of Nashville all the way into the smile of the country. You know, that is, you know, that's a big driver too. I think just in general, what we're seeing is there's just so much change. There is so much change in population lift, what the population wants, and then our logistics, channels anyway. I mean, everything from the fact that everything in this country used to go from west to east, and now it's largely going north and south, combined with the way people move, what they eat, how they wanna eat, how they wanna store things they own, what they wanna own, overhead they wanna have, that there's just has to be on the backside. Significant on a real estate investment to, you know, to, to meet that demand. Alright. Well, I think on that forward looking note, we'll go ahead and wrap things up for today. So I feel like we got a lot of great analysis for where, you know, the market took us in twenty twenty three, why we saw so much energy behind new builds, in cell and cold storage. And again, how they fit into a larger context of, you know, major macro trends, micro kind of demographic consumer demand trends, and how they fit into even an understanding of, multi family build outs for twenty twenty four. So with this wide sort of view of self and cold storage in the construction industry. My goal is hopefully later in the year have further touch points on this, to get a sense for, are these predictions coming true and what unexpected market movers as, you know, are bound to happen. There's always something fresh out there changing the scene, how they impacted some of where we put our flags here today. But until then, thank you to the three of y'all for your analysis. It's been great. Again, folks, we've been hearing from Chris TATji founder and president of DC Materials and board member for the structural building components association. We've also heard from John McAfee treasurer of the Texas Self Storage, and an owner and asset manager at storage place, and we were hearing from Corey Singer, Vice President of business development and pre construction at FCL Builders. Chris Johnny Corey. Thanks again for y'all's analysis today. Looking forward to the next one. And yeah, really appreciate it folks. Thanks, Dave. Thank you, Dan. Yes, sir. And thank you everyone for tuning in to today's episode of experts talk. If you like what you heard and saw today, make that you're subscribing on market scale dot com, checking out our previous conversations, and heading to our live shows tab because we've got live content all week long tomorrow. My, colleague and health care lead here, host of Highway to Health Mr. David Kemp, has taken y'all live for health care roundtable talking about AI's impact on value based care. And do we have a lineup of pros on that one? It's gonna be a great conversation. We're also talking about the ride share industry later in the week as well as social commerce trends you know, where does TikTok's, new store fit into our larger understanding of omnichannel retail and how can we take social commerce from a trend to traction for retailers out there. All that and more coming up on experts talk. So thank you everyone for joining us live today. I'm your host Daniel Litwin, the voice of b to b, and we'll catch you next time on experts talk.