The self-storage sector proved it can be resilient in thinner markets during the second quarter. Fewer deals were inked during the quarter, with dense urban infill locations and growth corridors attracting the most capital amid higher borrowing costs and tighter credit conditions, according to StorageCafe’s Q2 self-storage report.
Transaction volume totaled $755 million nationwide for the second quarter, with about 9 million square feet of rentable space changing hands. The average price per square foot increased 19% to $123 as investors concentrated their bets on targeted acquisitions, according to the report.
Several cities stood out for transaction size and record-setting valuations, led by Houston and New York City, which continue to draw capital thanks to strong demand, solid occupancy and active residential markets.
NYC logged $50 million in self-storage sales, including the largest transaction during the quarter and the highest valuation per square foot. Carlyle Group paid $50 million for a CubeSmart facility in Brooklyn at more than $545 per square foot. The deal underscores how dense, space-constrained markets command luxury-level prices, as noted by StorageCafe. Demand for self-storage in New York is steady thanks to stable employment, frequent move activity, housing constraints and population growth of about 2%.
On the West Coast, Walnut Creek, California, ranked second in self-storage deal value during the second quarter at $47 million. That included 220,240 square feet at $213 per square foot and represented nearly half of the East Bay suburb’s storage inventory in one transaction – Ancora Group Holdings’ purchase of an Extra Space Storage facility. The city has been named one of the richest retirement towns in the United States and has witnessed population growth of 6% over the past decade, but new storage development faces lengthy approvals, which leads to investors underwriting higher entry prices for existing stock.
With $39.4 million in self-storage sales, Houston ranked third during the second quarter. More than 410,000 square feet traded hands across multiple facilities, including two former Amazing Spaces assets bought by SmartStop Self Storage REIT. Deals in the city were valued at about $265 per square foot. Although the market has nearly seven million square feet of storage per capita, its population growth of 6% over the past decade and constant job churn in the energy, health and professional services sectors feed into sustained demand for storage.
Houston suburb Spring, Texas, recorded $35.3 million in self-storage sales, including two major facilities acquired by SmartStop REIT for $149 per square foot. The market is attractive for self-storage investors due to population growth of about 22% since 2014, which ensures household formation and mobility outpace new construction.
One of the most undersupplied cities in the United States, South San Francisco’s $30.3 million in self-storage sales came from one transaction. This was the sale of an Extra Space-branded facility for $349 per square foot. The region is a biotech hub with more than 250 life science companies and 12 million square feet of labs. Competition for land is fierce and investors justify high entry prices in the market due to scarcity, not growth, said the report.
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