Is Self-Storage Development Slowing Down?

National street rates remained level in May, although they are lower than last year.  Self-storage demand and occupancy remain strong, although operators are concerned about how the slowdown of the housing market will impact the storage market, according to the Matrix National Self Storage Report published in June by Yardi Matrix.

According to James McLean’s article “Future of Self Storage Development: Navigating the Changing Landscape of Construction Loans” published by Radius+, increased requirements are making it harder for developers to secure construction loans. Rates will likely peak soon and lower slowly, putting developers in more debt. This will likely result in fewer facilities being opened in the next few years.

According to Yardi Matrix, the share of projects under construction in May was 3.6% of existing stock, a minor increase of 0.1% from April.

This slower development still has some benefits for the industry. The delay in new self-storage facilities being built allows existing facilities to have higher rates and occupancy while supply is unchanged. The historically high rental rates can help developers make great profits to balance the higher construction costs in the current market.

In other words…now is the time to build while others are sitting on the sidelines. If you have a parcel or submarket in mind, contact Sensei Katherine for a preliminary report (first one is free, successive reports are $99). In this preliminary review of supply, new development in the pipeline and market demographics, Sensei shares her opinion and the pros and cons of the market. The preliminary report helps you decide whether or not the submarket may be viable and worthy of a self-storage feasibility study.