Marina market insights

Steven Ekovich, executive managing director and partner of Leisure Investment Properties Group (LIPG), looks at how the marina market performed in the USA in 2024 and how it’s panning out this year.

The boating market has charted a course of remarkable growth in recent years, and this trajectory showed no signs of slowing in 2023, with continued momentum expected to carry into 2024.
Finite storage options, together with technological advancements and innovative boat designs, have propelled a surge in demand for recreational boats.
Notably, the allure of boats exceeding 25ft (7.6m) has bolstered the necessity for public storage amplifying the demand for wet slips and drystack options.
A recap of 2023
In 2023, the US marina industry reported robust revenue of $6.7 billion, marking a 1.1% increase from the preceding year. However, amidst a narrowing spread between debt costs and marina cap rates, caution looms as this disparity may deepen the chasm between buyers and sellers. Despite these challenges, the industry fundamentals remain robust, underpinning operations amidst macroeconomic shifts.
Investment activity slowed but both the median and average sales prices for marinas were up. Buyers acquiring without leverage were still buying, but the sky-high interest rates caused severe disruptions for investors needing financing.
Boat sales and slip occupancy
The boating market and industry have seen significant growth in recent years, and this trend is expected to continue in 2024.
Boat sales have slowed to a pre-pandemic level, yet there is a signi?cantly higher number of boaters today than pre-pandemic, and the overall age of boaters has shifted towards younger generations.
Interestingly, the usual trend during economic paradigm shifts is to see the larger yacht segment cool off ?rst, followed by a slowdown in the smaller yacht segment. However, the current situation is the opposite. This can be attributed to the rise in interest rates and inflation, which have impacted the affordability of smaller yachts. Despite these challenges, there is still hope for strong activity in the market. The larger market segment is actively engaged in both acquiring and selling yachts, and the inventory of available yachts remains scarce, as reported by a number of yacht brokers in 2023.
Rental rates (slip and drystack) growth has benefited from full occupancies and extensive waiting lists – demand indicators that are still strong through Q1 2024, and which we expect to remain strong throughout the year. We continue to see marinas in suburban and rural markets benefit from net migration out of major metropolitan areas to the southeast, a shift that was initially driven by the COVID-19 pandemic and the ability to work remotely.
Rental boats
Dockmaster states the boating rental trend continues expanding as more individuals continue to rent boats for their boating needs – be it fishing boats, yachts or other kinds of watercraft.
Boats up to 28ft (8.5m) are among the most sought-after rental options, and boats between 28ft and 45ft (13.7m) are also in high demand. However, the market for boats longer than 45ft is limited. Tours, charter rentals and day cruise rentals are also widely available. Rental has fantastic potential as the market expands and, by 2028, it is expected to surpass $280.2 million in size.
Boat rental companies provide a stable income for slips at a marina with extra space. They are better tenants than individuals as they tend to be better financed and, as a result of renting multiple slips, they don’t want to lose their space in a marina so they pay on time.
The supply side
According to IBISWorld, there are approximately 10,445 marinas in use in the United States. This inventory is not materially increasing but new projects are coming online with decent consistency. We also see marina expansions as a common value-added component.
The “supply” takeaway is that marinas are not like other commercial real estate, which can be easily developed with the right site, proper zoning and capital. There are expansion opportunities, but there are still barriers to entry for new marinas. This can be an advantage or disadvantage depending on who you ask (marina owner, boat owner, investor, government, etc.), but marina valuations are positively impacted by limited supply (and a low probability of new supply) since demand and rate growth for existing storage space is high.
On the other hand, low-demand locations with ample supply are more prone to vacancies – not necessarily due to property-speci?c causes, but a factor of the location and boating market. We carefully assess those factors with each asset our team works on because there are always opportunities to improve operations, change the business model, and/or add value by building on the uplands, e.g. building a drystack, adding a restaurant or apartments, etc.
Investment activity
Marina sales data is dynamic as recent sales become public, are recorded, or are identified with a price. Based on the most current available data recorded for 2023 sales, transaction volume was down while both the median and average sale price were up from 2022. The average price was up slightly from $4,468,685 to $4,493,488 an increase of 0.5%, while total recorded sales between $1-20 million declined from 129 in 2022, to 78 in 2023. The median sales price in 2023 was $3,185,000 up from the 2022 median of $2,750,000, a whopping increase of 15.56%! The median price is considered a better statistical measure of trending value because the average is easily influenced when a large quantity of lower or higher-priced sales exists in the data set. Further analysis of the intermediate subset ($1-10 million range) provides insights into where marinas traded in 2023, and the result points to the higher range with fewer overall sales.
Market forecast for 2024
After looking at all the demand drivers, marina inventory levels, macroeconomic factors, transaction data and impact from natural disasters, we have a cautious yet optimistic outlook for 2024. We believe transactions will continue at a healthy pace as fundamentals remain strong. Sellers and buyers must be cognisant of the changing environment so appropriate expectations can be set:
• With financially healthy marinas, increasing occupancy and strong support for increasing slip/rack rates, we believe the asset class remains a great alternative investment for both private clients and larger, institutional investment companies.
• We expect to see more owners continue holding their asset(s) when physically able (and desiring) to continue operating. Cash flows may stagnate in some areas, but the fundamentals are extraordinarily strong around the country and lead to excellent income for owners.
• With inflation seeming to stall and hopefully fall by the end of 2024, interest rates should come down providing easier access to credit for marina investors.
• Consolidation is expected to continue by institutional investment companies, with excellent opportunities for stabilised and value-added marinas around the country.
• Boat sales are normalising to pre-pandemic levels. 95% of boats sold in the US are under 26ft (10m) – a demographic more likely to finance the purchase, and therefore more sensitive to rising interest rates, so smaller boat sales should pick up in the second half of the year if rates drop as is widely expected.
• Marina owners should focus on boater retention and introduce amenities and events that foster a stronger community. The goal should be to keep current boaters active at the marina.
• Insurance rates are rising, and it is best to stay on top of how this expense may impact a marina’s value. If you are in a hurricane country, make sure you insure your docks as this can be an extremely expensive repair.
While there is uncertainty about the economy and several shifts to the investment landscape, we are looking forward to another momentous year for the marina business in 2024.