As in virtually every other sector, self-storage operators are struggling to figure out what the turbulent state of policy, the economy and migration holds for them in the months ahead. However, they appear to be in a slightly better position than developers in other sectors, as investment remains comparatively strong and new technology is being leveraged to improve returns.
“Self-storage continues to garner increased institutional investor interest as an emerging mainstream commercial real estate investment asset class. Key draws include the property type’s asynchronous risk profile and inflation resistance,” stated Marcus & Millichap, in its Midyear 2025 Self-Storage National Investment Outlook. It noted that private investors remain the driving force behind transactions; they made up 75% of sellers and 45% of buyers year-over-year in 1Q 2025.
In spite of the uncertainty about what will happen with interest rates, the report finds that capital remains generally available for self-storage investment sales, especially for investors with a proven track record in storage ownership and operations. Stabilized assets with high occupancy at the time of sale are favored and made up 20% of trades completed in the year ended March 2025.
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Self-storage sales activity rose from 2020 to 2022, then moderated. However, the number of sales completed in the six months ended March 2025 increased year-over-year. “Macroeconomic conditions have raised the potential costs of waiting” to buy, the report commented. Sales were especially strong in the Southeastern U.S., where about one in three sales occurred, thanks to high supply and favorable demographics, including a shift in migration to lower-cost cities. The West Coast and the Texas-Oklahoma region also performed well.
Nevertheless, the industry faces some challenges. Deliveries of new units appear to be moderating in 2025 due to the high costs of borrowing. “A quarter of the total expected square feet are contained within only eight major metros or regions, among which are Atlanta, Houston and Southeast Florida. Meanwhile, 11 major markets will welcome less than 500,000 square feet in 2025, including San Diego, St. Louis and Denver. As a result, many of these markets will note a decline or only slight increase in their vacancy this year,” the report noted.
Another challenge is that the cost to own or operate a self-storage facility has been climbing since 2021 due to real estate taxes, on-site management fees and rising insurance costs as extreme weather events push up replacement costs, though the rate of growth is slowing. In addition, Americans worried about job security are less likely to form new households or to move to other locations. “Net in-migration was down in 2020-2024 compared with 2015-2019, which carries implications for self-storage demand,” the report noted.
The fact that many would-be homeowners are forced by the high costs of buying to continue to rent is likely to maintain demand for self-storage units. On the other hand, a less liquid housing market means fewer relocations – a major driver of self-storage demand. Still, the national self-storage vacancy rate appears to be stabilizing. “The rate should rise by 50 basis points year-over-year to 10.3% in December,” the report estimated.
“Asking rents have likewise been tumultuous,” it stated. “Operators with sufficient resources have increased discounts on street rates before subsequently adjusting rates to marketed levels. Over time, this has led to a widening gap between the average asking rent and the overall mean. Indeed, the effective discount on the street rate has widened from about 6% in 2017 to 43% in early 2025.” This effect is most common in larger markets where owners like self-storage REITs operate. At the same time, “the nomadic nature of many self-storage renters raises the possibility that the rent discount results in a net loss,” the report cautioned.
It noted that technology can be used to control costs and improve efficiency. For example, the need for on-site labor, whose average wages have risen 34% since 2019, can be lowered through a security system, automatic gate, kiosks and a website, while also improving accessibility for customers. Though most common in the largest urban areas, “the broad integration of technology and web-based marketing and leasing, as well as the implementation of dynamic pricing models, have fundamentally changed the operational structure and reduced labor cost inefficiencies,” the report stated.
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