Self-storage transaction volume during the last six months of 2024 totaled about $3.2 billion, which is about 2.4% lower than the average second-half transaction volume reported from 2015 to 2019, according to Cushman & Wakefield’s most recent self-storage report.
This volume aligns more closely with transaction trends before the pandemic-driven surge in self-storage investments between 2020 and 2022. During that time, nearly $50 billion in transaction volume was realized, far exceeding the $25 billion recorded in the seven years prior, from 2013 to 2019. The firm said data for the second half of 2023 was skewed due to significant merger and acquisition activity within the sector.
Meanwhile, valuations in the self-storage sector have declined over six consecutive quarters to $139 per square foot by the second quarter of 2024, after reaching a peak of $172 per square foot during the second half of 2022. Recent trends are pointing to stabilization, with prices rising to $141 per square foot, according to Real Capital Analytics.
Self-storage cap rates increased by almost 100 basis points between March 2022 and July 2023, from lows of 4% to 4.5% in the first quarter of 2022 to between 5% and 6% during the second quarter of 2024 for a typical class A facility in a top 40 MSA. During this time, rates increased across all commercial real estate sectors as the Federal Funds Rate target rose to 5.25%, according to Cushman & Wakefield.
“While the Fed did drop its target rate 100 bps in the second half of 2024, recent decisions on tariffs by the current presidential administration may slow the need for the Fed to decrease interest rates if the fear of sustained or increased inflation persists,” said the report.
Self-storage occupancy leveled out near 90% throughout 2024, influenced by increasing interest rates, declines in home sales and an influx of new supply, said the report. Physical occupancy generally ranges from 85% to 92%, with economic occupancy lower by approximately 5% to 10%.
Asking rents declined year-over-year during the first half but are showing signs of stabilization and improvement, said Cushman & Wakefield. Advertised rates were down 4.1% in July at an average of $16.40 per square foot, but by December, the decline had moderated to 2.3% year-over-year, at $16.28 per square foot.
Several U.S. metros logged positive month-over-month growth starting in September. This trend continued into the first quarter, with advertised rental rates only 0.8% lower in February 2025 year-over-year. Notably, 11 of the top 30 MSAs saw an increase in rates year-over-year during this period, said the report.
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