Self-Storage Rates Dip Despite Expected Seasonal Strength

Street rates for self-storage units fell in May across all top metros, influenced by current economic conditions and high interest rates.

Jordan B. & Han-Gwon Lung
June 28, 2024

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Good morning. High interest rates continue to impact self-storage demand and performance well into 2025, according to Yardi Matrix’s latest report. Plus, loan modifications hit $22B in the past year, with $9B in 2024 alone.

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Market Snapshot

S&P 500

GSPC

5,482.87

Pct Chg:
+0.091%

FTSE NAREIT

FNER

722.44

Pct Chg:
+0.93%

10Y Treasury

TNX

4.286%

Pct Chg:
-0.03

SOFR

1-month

5.33%

Pct Chg:
0.0%

*Data as of 6/26/2024 market close.

SELF STORAGE

High Interest Rates Dampen YoY Self-Storage Performance

High interest rates are expected to continue affecting storage demand and transaction activity well into 2025, says Yardi Matrix.

Declining: Street rates for self-storage units fell in May across all major metros tracked by Yardi Matrix. The average annualized same-store asking rent dropped by 4.5% year-over-year, from $17.36 in May 2023 to $16.44 in May 2024. This decline reflects broader economic challenges and a dampened real estate market.

Zoom in: High interest rates are expected to influence storage demand from home sales and self-storage transaction activity until 2025. Self-storage REITs are particularly affected, experiencing a 6.7% decline in same-store rents at stabilized properties, compared to a 3.5% decline for non-REIT competitors.

On a positive note: May saw positive MoM rent growth in nearly all top metros. National average combined street rates per square foot rose 0.6% from April to May 2024, reaching $16.4., returning to standard seasonal patterns. Austin led with the highest monthly rent increases due to a diminished supply.

Supply and demand: Philadelphia led in new supply over three years, while NYC, Denver, Seattle, and Nashville saw rent growth from less lease-up space. New supply remained flat monthly, but construction rose in Tampa, Charleston, Nashville, and Inland Empire. Orlando’s pipeline decreased most but still leads in under-construction activity among the top 30 markets.

➥ THE TAKEAWAY

Big picture: While high interest rates and economic conditions are currently suppressing self-storage street rates, the sector’s long-term outlook remains positive, especially in high-growth metros with strong population trends and moderated new supply.

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✍️ Editor’s Picks

Running out of time: Loan modifications surged in 2024, with $22B modified in 12 months, and $9B in 2024 alone.
Construction conundrum: A proposed bill in NY aims to expedite construction by allowing developers access to neighboring properties, but landlord rights are at stake.
Prestige deception: Developer Michael Shvo faces a fraud lawsuit seeking $615M in damages for broken promises and substandard construction in exclusive club partnerships.
REIT rebirth: REITs increased their May investments by $119.9M, signaling investor interest due to lower prices across property sectors.
Up for grabs: The Fort Lauderdale Executive Airport hangar and office are up for sale due to the owner’s $124M fraud judgments.

🏘️ MULTIFAMILY

Sky’s the limit: The LA City Council approved Mitsui Fudosan’s 50-story highrise at 754 S Hope St, with 580 units, shops, and parking.
Bishop Ranch boom: Sunset and AvalonBay are about to build a 457-unit apartment complex in San Francisco’s Bishop Ranch business park, part of a $5B retail village redevelopment.
Student oasis: Gilbane Development plans to build a 277-unit ASU student housing complex in Tempe, AZ, replacing the 186-room Moxy hotel.
Innovative bond: The Bay Area Housing Finance Authority will issue a $20B bond for 70K–90K affordable units, benefiting 9 counties, focusing on low-income areas.

🏭 Industrial

Partnering up: Triten and TPG Angelo Gordon will invest up to $1B in IOS assets over 5 years, expanding on their existing JV, which has already acquired $500M in 16 markets.
Tax troubles: Rising property taxes are squeezing industrial property owners and occupiers, with assessments up an eye-popping 29.6% and taxes increasing 21.3% on average.
Chilling moves: Global Net Lease (GNL) sold a portfolio of cold storage properties for $170M, acquired for $153.4M, at a 7.88% cash cap rate.
Buying time: West Hollywood developer Faring secures a $50M bridge loan to stabilize a 500KSF industrial property in Victorville.

🏬 RETAIL

Retail revival: Miami’s last Sears will soon become a mixed-use complex with 995 apartments and 55 townhouses by RK Centers.
Upper West Side savior: Wegmans will open its 3rd NYC location at Broadway/West 65th, spanning 58KSF, boosting nearby luxury apartments and neighborhood retail.

🏢 OFFICE

Home success: Kin Insurance subleased 20KSF in Chicago’s Merchandise Mart from Avant, part of its growth as an 800-person remote workforce.
Giant downsizing: Flexport, a digital freight giant, is seeking to sublease 75KSF in Atlanta after expanding its office space.
Tenant shuffle: Lenders acquired a majority stake in a San Francisco office building as tenants like the City and County of SF plan to vacate.
TikTok expands: The US arm of TikTok expanded its Bellevue, WA office by 195KSF to 280KSF at Lincoln Square North Tower.

🏨 HOSPITALITY

Smart strategies: Hotel investors remain optimistic, with 50% planning to up investments despite market challenges, focusing on value enhancement opportunities.

📈 CHART OF THE DAY

Only a few years after the pandemic, NYC is once again the top destination for relocators, bringing in over twice as many migrants (>3.5% of all relocators) as runner-up Austin (>1.5%) despite higher-than-ever rents.