Rents for Self-Storage Units Have Declined But Fundamental Remain Strong

The self-storage market has been growing for many years, and research suggests that growth will continue through to 2026, with the market growing at a compound annual growth rate (CAGR) of 5.45% between 2019 and 2026. Last year, the market was valued at $48.02 billion and is expected to be worth $64.71 billion by the end of the forecast period. This is truly dynamic growth and is above the economy’s growth rate. Demand for self-storage units remains strong and the market remains strong, performing well throughout 2021. In September of this year, street-rate rents increased for both 10 x 10 non-climate controlled and 10×10 climate controlled units on a year-over-year basis, by 9.4% and 10.6% respectively. Yet, according to a report by Multihousing News, a more granular perspective suggests that rents are in decline. With month-over-month numbers down. 

Month-over-month, street rate rents for 10×10 non-climate-controlled units were unchanged as of September, averaging $128. 10×10 climate-controlled units declined by 70 basis points, falling from a mean of $147 to $146. One reason that has been offered is that the demand drivers that pushed the self-storage market to all-time-highs during the pandemic, were unique and as the economy returns to normal, this demand has softened.

Despite this, the Sun Belt continues to have very strong markets, especially in Tampa and Miami. Miami has the highest rent growth in the country, with double-digit growth for all unit types, with 10×10 non-climate-controlled units up 20% and 10×10 climate-controlled units up 16%, year-over-year, as of September 2021.

Driving these strong growth numbers are the favourable demographic winds coupled with good job numbers, which have made Tampa into a multifamily star and pushing demand for storage space. Year-over-year, Tampa has the highest growth in unit sizes and types in the last 24 months. Rates for a standard 10×10 non-climate-controlled unit and a 10×10 climate-controlled unit, were up 11% and 14% respectively.

As of September, there were 2,399 self-storage properties across the country, with 663 new facilities coming, 1248 planned and 488 under consideration. This new supply has grown the existing industry by 8.5%, 10 basis points more than in August.

Philadelphia is the state with the biggest development pipeline, according to September’s results, beating New York to top spot, which until then had the most development activity in the months prior. 19.2% of Philadelphia’s inventory is made up of projects under consideration or being planned. As of September, the state had 60 projects in different stages of development, covering 4.7 million square feet of storage space. 
The fundamental ingredients for growth have not changed, however. As companies embrace remote and hybrid work models, there will be continued downsizing of corporate buildings, resulting in many businesses storing their property in self-storage units. Asia is the future: there, self-storage is the preferred route for many companies, because office space is so expensive. The factors driving the shift to greater use of portable storage pods in the West are different, but the destination is the same.