The self-storage sector is tied closely to residential, as Trepp reported earlier this month. “When folks move from one home to another, they’ll often lease a storage unit,” Trepp reported. “Those temporary agreements often become permanent, or at least longer than anticipated. Of course, the sector has other demand drivers. But folks moving from one place to another account for roughly half the demand for units.”
With home sales historically weak year-to-date, the self-storage business “had been on the outs with investors as supply got well ahead of demand,” according to Trepp. Yardi Matrix data show a 9.4% increase in storage units over the past three years.
The tide may be starting to turn, though. New supply for the 12 months through May was just 2.9% of inventory, according to Trepp. Sector leader Public Storage has estimated that supply would grow by 2.5% this year. The country now has an estimated 55,000 self-storage properties, and broker Mark Helm, a longtime self-storage specialist, told Trepp the Southeast might be seeing the biggest supply per capita of any region.
In its latest report on the self-storage market, Yardi Matrix noted that at the recent Illinois SSA Great Lakes Owners Summit in Chicago, attendees noted strong performance in Midwest markets like Chicago and Minneapolis. “Steady demand and a slowdown in new supply have helped fundamentals recover more quickly in the region,” according toi Yardi Matrix. “Nationally, however, recovery has been uneven due to ongoing economic uncertainty and a still-fragile housing market. Despite strong investor interest, transaction volume has been muted by high interest rates and wide bid-ask spreads.”
Nonetheless, Yardi Matrix reported that industry sentiment is improving, “with rents stabilizing and development activity beginning to ease.” Although rents are down slightly year-over-year on a national basis—0.1% in June, compared to 0.4% in May and 0.3% in April—many metro areas have seen increases. Same-store rates for non-climate-controlled units increased Y-O-Y in 13 of the top 30 metros. For climate-controlled units, 19 of the top 30 metros saw y-O-Y increases.
Trepp cited SitusAMC as saying that properties are facing slower rent growth than they have been accustomed to, largely because of the glut of supply. “But valuations are now stable. It also noted that properties in infill markets—those that are largely built out, so supply additions are fewer—are seeing rent growth and improved customer retention rates.”
A newly issued Marcus & Millichap report quoted by Trepp, Self-Storage Investment Outlook for Midyear 2025, noted that insurance costs are becoming a greater concern to self-storage operators. On the other hand, the report also noted that the volume of property sales during the six months through March was up from a year ago. It noted that debt capital remains plentiful, with banks, life insurance companies, and CMBS all active in the sector.
Yardi Matrix noted that Denver and Charlotte specifically have been grappling with oversupply, underscoring the point that in common with many commercial property types, self-storage is a regional business. To that end, the Marcus & Millichap report provides both national and local market intelligence on the sector.
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