Property Perspectives

Stronger than expected rent growth in the self storage sector expected to continue

Our updated outlook for self-storage.

by CrowdStreet

Over the last two decades, the self-storage sector has seen expansive growth. This growth was further accelerated immediately following the COVID-19 pandemic, due in part to relocation and work-from-home trends. As a result, sector prices appreciated by 65% compared to 2019 levels*, with occupancy at record highs of 95%* nationwide.

Despite some modest cap rate expansion, NOI growth remains strong across the sector. According to the latest quarterly update, self-storage posted “stronger-than-expected*” rent growth in the second quarter of 2022, leading Green Street Advisors to push up their NOI forecast to 17% annually, which is expected to outpace 2021 levels. 

*Green Street Advisors - Self-Storage Sector Update: More of the Same

The Self Storage space is institutionalizing as the major storage REITs, including Extra Space, Cube Smart, Public Storage, and Life Storage, acquire properties, upgrade, and consolidate this fragmented asset class. Older self-storage facilities often lack amenities such as climate control, security systems, etc., creating further opportunities for the development of self-storage units.

Self-storage can help mitigate the effects of inflation, typically due to the owner’s ability to change rents month-to-month or annually. The nature of tenants is also sticky, meaning most keep their belongings in for over a year after they store them. Developing these assets is also relatively simple as compared to other major assets like multifamily real estate or industrial. All told, self-storage ranks high, alongside industrial, as one of the more attractive investments of all property types, especially over the past two years.

Green Street expects a downtick in new deliveries in 2022 until 2024 due to labor shortages and supply chain issues; however, construction deliveries are expected to climb in 2025 and beyond, given the strong fundamentals in the sector**.

**Green Street Advisors - U.S. Self-Storage Outlook, 2022

We believe the increasing need for self-storage due to migratory trends and a continuation of remote work will likely create more opportunities in 2023. We have recently updated our market outlook, including our outlook for self-storage real estate. To read more about the opportunities and outlook in each sector, please access our CRE Market Outlook.

This article was written by an employee of CrowdStreet, Inc. (“CrowdStreet”) and has been prepared solely for informational purposes. The information contained herein or presented herewith is not a recommendation of, or solicitation for, the subscription, purchase or sale of any security or offering, including but not limited to any offering which may invest in the geographic area(s) or asset type(s) mentioned herein, whether or not such offering is posted on the CrowdStreet Marketplace. Though CrowdStreet believes the information contained and compiled herein has been obtained from sources believed to be reliable, CrowdStreet makes no guarantee, warranty or representation about it. Any projections, opinions, assumptions or estimates used are for example only and do not represent the current or future performance of the subject thereof. All projections, forecasts, and estimates of returns or future performance, and other “forward-looking” information not purely historical in nature are based on assumptions, which are unlikely to be consistent with, and may differ materially from, actual events or conditions. Such forward-looking information only illustrates hypothetical results under certain assumptions. Nothing herein should be construed as an offer, recommendation, or solicitation to buy or sell any security or investment product issued by CrowdStreet or otherwise. This article is not intended to be relied upon as advice to investors or potential investors and does not take into account the investment objectives, financial situation or needs of any investor. Investment opportunities on the CrowdStreet Marketplace are speculative and involve substantial risk. You should not invest unless you can sustain the risk of loss of capital, including the risk of total loss of capital. Past performance does not guarantee future performance. All investors should consider such factors in consultation with a professional advisor of their choosing when deciding if an investment is appropriate. Understanding the trade-off between risk and reward can help you evaluate strategies to pursue your financial objectives.

Group 2010204
Get the word on the street.

Sign up now for our newsletter to discover key insights, market analysis updates, and expert opinions.

You're In!

Thanks for signing up for our monthly newsletter.