The self-storage development pipeline is slowing in line with forecasts, with construction starts and space under construction continuing to decline from cycle highs achieved in late 2023 and early 2024, according to the most recent Yardi Matrix self-storage supply forecast.
New development activity has been hindered by multiple factors, including relatively high long-term interest rates that are depressing existing home sales, which is a key self-storage demand driver. Weaker demand has translated into weaker advertised rental rate growth and publicly traded self-storage REITs have reported that minimal revenue growth and declining occupancy have driven net operating income off post-pandemic highs. Relatively high long-term interest rates also continue to depress new development valuations, said Yardii Matrix.
In addition, economic uncertainty stemming from the current administration’s trade objectives points to a likely slowdown in economic growth, but a recession is not likely in the near term.
Yardi’s updated Q3 forecast anticipates full-year 2024 construction starts will be below 2024 levels, and a further reduction in new construction activity is expected in 2026. New supply is expected to drop to 46.1 million net rentable square feet (NRSF) next year and 42 million NRSF in 2027. About 10.69 million NRSF started construction in the second quarter among the markets covered by Yardi Matrix for more than two years.
Completion timelines for properties finished during the second quarter declined marginally to an average of 410 days, or 13.7 months. This is the fourth consecutive quarter that completion times have averaged above 400 days, said the report.
New self-storage supply delivered in 2023 and 2024 has been slow to absorb. Rent growth was negative for most of 2024 and flat in 2025, the report said.
“Weak operating results have translated into a noticeable decline in longer-term development interest,” Yardi Matrix said.
“The number of projects and NRSF in the planned pipeline modestly declined in the first half of 2025, while the prospective pipeline continues to contract noticeably. In addition, the number of projects with a deferred status continues to increase, and the number of abandoned projects identified by Matrix remains elevated.”
The self-storage industry has grown significantly since the Great Financial Crisis, and absent new demand drivers, new supply above 2% of stock likely exceeds long-term demand growth, according to Yardi Matrix. The firm’s Q3 forecast models a decline in longer-term new self-storage supply to roughly 1.5% of stock in later years.
At the end of Q2, the planned pipeline contained 123 million NRSF, down 1.8% quarter-over-quarter and a fall of 4.6% year-over-year. The planned pipeline peaked in September 2024 at 129.77 million NRSF, according to the report.
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