With self-storage supply pressure easing, the pace of advertised rate declines for the sector has continued to slow. Across the country, advertised rates were down 1.2% year-over-year in January, with annualized average rent per square foot of $16.32 for all unit sizes and types. This represents an improvement from a decrease of 2.2% in rents in December and a 2.4% decrease in November, according to Yardi Matrix’s February national self-storage report.
From December to January, the national average advertised rate per square foot increased by 0.3%, a notable improvement from the month-over-month performance in January 2024 of -0.6% and January 2023 of -0.1%, according to the report.
The share of projects under construction nationwide dropped 10 basis points in January from December. Three-year supply has been slowly dropping on a national level over the past year, from 9.1% in January 2024. The slowdown in deliveries will be a tailwind for the sector, said Yardi Matrix, which predicts supply in 2025 will drop 15% from 2024.
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The self-storage sector has continued to attract new customers through low introductory rental rates while aggressively increasing rents for existing customers, the report said. However, self-storage REITs were much less aggressive than their non-REIT competitors in dropping advertised rates in January, according to the report.
Washington, D.C., Seattle, Chicago, Houston and Portland all saw advertised rates increase year-over-year in January. Washington, D.C., was also the best-performing market based on REIT results last quarter, likely due to low new supply over the past year, equal to 1.3% of starting stock. The potential threat of government layoffs may stifle rate growth in the nation’s capital during the coming year, said Yardi Matrix.
Tampa continues to perform well despite a large amount of supply in lease-up, with advertised rates increasing 1.7% year-over-year. The market likely benefits from hurricane-driven demand, the report said. Los Angeles also has been heavily impacted by natural disasters, but data has not yet shown if the recent wildfires have impacted the local storage market.
“Fire-related demand is not as strong as demand due to hurricane- or flood-related damage since items get destroyed, but there may be an impact on local supply due to facilities being damaged,” said the report.
Chicago has seen among the lowest amount of new supply delivered over the past year and has also seen one of the strongest turnarounds in rate performance, with advertised rates increasing 1%, compared to -1.6% in December. On the other hand, Phoenix has the most supply under construction, which will continue to create challenges for the market, said Yardi Matrix.
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Kristen Smithberg
Kristen Smithberg is a Colorado-based freelance writer who covers commercial real estate, insurance, benefits and retirement topics for BenefitsPRO and other industry publications.
