Affordability challenges continue to impact the home buying and selling market despite a slight pullback in mortgage rates, which has had ripple effects in the storage arena, according to Yardi Matrix National Self Storage Report for June. Advertised rent growth for the self storage sector dipped in May and remains negative on a year-over-year basis, said the report.
The national advertised rate fell 0.5% year over year in May, compared with -0.3% in April and -0.2% in March, although half of the markets studied by Yardi Matrix experienced year-over-year increases in advertised rates. Annualized average rent per square foot stood at $16.76 in May.
Advertised rates for non-climate-controlled units dropped 0.8% year over-year in May, compared to decreases of 0.6% in April and 0.5% in March. Rates for climate-controlled units fell 0.2% year-over-year in May, after remaining flat in April and rising 0.2% in March.
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Self storage REIT rate growth also decelerated in May, with same-store advertised rents at stabilized properties for all REITs up 0.7% year-over-year vs. 1.4% in April, said Yardi Matrix. Chicago was the strongest-performing top metro for advertised rate growth in May, driven by limited new supply and resilient renter demand.
On a month-over-month basis, most top metros saw advertised rates increase in May. The average growth from April to May across the country was 0.5%, slightly below the typical 0.6% growth, suggesting less seasonal demand materialized than usual. Month-over-month rents increased the most in Austin at 1.5% in May, up from 0.9% in April. However, Austin’s year-over-year rent growth remained among the weakest.
California markets reported mixed performance, with San Jose and San Francisco posting increased year-over-year advertised rates, Los Angeles posting an increase in advertised rates both year over year and month over month, and Sacramento underperforming as year-over-year rates slowed on new supply. Despite having below-average supply, San Diego experienced weak asking rent growth, indicating soft demand, said the report.
Atlanta was the only top metro to show a notable improvement in rate performance in May, with rates declining 0.7% year over year compared to a 1.9% decline in April, said Yardi Matrix.
New supply nationwide over the past three years is equal to 9.4% of starting inventory. San Antonio has the most new supply thanks to the delivery of two new properties over the past year, which pushed asking rents down 2.3% year over year. With nine properties under construction and 26 in the planning phase, San Antonio will continue to experience slower rate growth, the report predicted.
Meanwhile, Minneapolis has experienced a significant reduction in lease-up supply over the past year, and limited new supply has helped support strong asking-rate growth in the market, with advertised rates increasing 1.3% year over year, the report said.
About 55 million net rentable square feet of space is under construction across the country, equal to about 2.8% of existing inventory. Las Vegas has the most supply under construction, equal to 7.2% of existing stock through the end of May, which will put further pressure on rate performance after advertised rates declined 3.5% year over year in May. The market enjoys some strong demand trends, which has helped absorption, said the report.
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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.
