- Self-storage REITs reported a 1% revenue decline in Q424, driven by falling occupancy and rental rates. However, rate stabilization in early 2025 suggests a potential market recovery.
- While advertised street rates fell 0.8% YoY in February, the pace of decline has slowed. Some major metros, including Tampa, San Jose, and Chicago, saw rate increases.
- New supply is moderating nationwide, with construction activity forecasted to decline 15% in 2025, 18% in 2026, and 8% in 2027, easing oversupply concerns.
- Self-storage sales volume is projected to increase 50% YoY in H224 as private investors remain active.
Over the past two years, the US self-storage market has experienced softening demand, declining occupancy, and weaker rental rates. According to Yardi Matrix’s National Self Storage Report, these trends are primarily due to high inflation, slowing home sales, and oversupply in key regions.
Despite these challenges, the pace of rate declines is slowing, and industry fundamentals are beginning to stabilize. While Sun Belt regions are still grappling with an oversupply of storage units, other markets, especially in the Northeast, Midwest, and West, are showing early signs of improvement.
Occupancy levels have remained flat, and higher rents in the second half of 2025 may help drive a modest revenue rebound for self-storage operators.
Revenue and NOI Declines Persist
The nation’s largest self-storage REITs experienced a 1% revenue decline in Q424, marking the fourth consecutive quarter of slowing revenue growth.
- NOI growth for 2024 averaged -2.2% as expenses increased, putting further pressure on bottom-line performance.
- Occupancy levels dropped 0.5% YoY but are expected to remain flat or improve slightly in 2025.
- Rate growth may drive revenue gains in late 2025 as the supply pipeline slows.
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Signs of Rate Stabilization
Since mid-2022, self-storage operators have battled declining street rates, but recent data suggests price trends are improving:
- In February 2025, national advertised street rates averaged $16.42 PSF, down 0.8% YoY, improving from -1.1% in January to -2.2% in December.
- Some top metro markets saw rate increases, signaling potential pricing power recovery:
- Tampa: +3.1%
- San Jose: +3.0%
- Chicago: +2.1%
- Washington, D.C.: +1.5%
- For the first time since August 2022, REITs increased their advertised rates YoY by 0.3% in February, while non-REIT competitors still saw a 1.4% YoY decline in the same-store markets.
- Non-climate-controlled (NCC) unit rates fell 1.0% YoY, while climate-controlled (CC) unit rates dropped only 0.6% YoY, a marked improvement over previous months.
Metros with Positive Rate Growth
Several markets saw YoY rent increases for self-storage units, driven by low new supply and stable demand:
- San Jose: +3.0% YoY, benefiting from low new supply.
- Tampa: +3.1% YoY, still experiencing hurricane-driven demand.
- Seattle, Portland, and Washington, D.C.: All saw modest rental rate increases.
Conversely, markets with oversupply challenges, including Atlanta (-3.5%), San Antonio (-3.3%), and Phoenix (-2.3%), continued to see YoY rate declines.
New Supply Slowing, But Some Metros Still Face Oversupply Risks
As of February 2025, 55.8M net rentable square feet (NRSF) were under construction, equivalent to 2.9% of total existing stock—a 10 bps decrease from January.
The self-storage development pipeline is cooling, with forecasts showing:
- 15% decline in new supply in 2025
- 18% decline in 2026
- 8% decline in 2027
Metros with High New Supply Under Construction
Some cities are still seeing high levels of construction activity, which could weigh on future rent growth:
- Phoenix: 6.6% of total inventory under construction (highest in the US)
- Tampa: 6.0% under construction
- San Antonio: 4.9% under construction
On the other hand, metros with lower supply pipelines, such as San Jose (0.0%) and Washington, D.C. (1.7%), may experience more substantial rental growth in the coming months.
Investment Sales Expected to Surge in 2024
The self-storage investment market saw a significant increase in transaction volume in late 2024, a trend expected to continue this year.
- Estimated self-storage sales volume is projected to increase 50% YoY in H2 2024.
- Private equity and well-capitalized owners remain highly active, especially in secondary markets where new supply is slowing.
- As fundamentals improve, REITs and institutional investors may re-enter the acquisitions market in late 2025.
What’s Next for the Self-Storage Market?
The self-storage industry remains in a transition phase, but the data points to a market nearing stability rather than continued decline.
- Rate Recovery in Late 2025: As new supply declines, self-storage operators may regain pricing power, especially in markets with lower construction pipelines.
- Active Investment Market: Robust transaction activity, driven by private investors and REITs seeking opportunities, will likely occur in the second half of 2025.
- Stronger Performance in Select Metros: Markets with low new supply (San Jose, Washington, D.C., and Seattle) may experience faster rent recovery than those facing oversupply.
- Occupancy Stability: While demand remains weaker than pre-pandemic levels, flat occupancy trends suggest the worst may be over.
Bottom Line:
While self-storage operators still face short-term challenges, the industry is on track to gradually recover in late 2025. If demand remains stable and new supply continues to decline, operators could see stronger rental rate growth and revenue gains in 2026.
