Self-Storage Rents are Decreasing

Self-Storage Rents are Decreasing
Self-storage facilities were a booming industry during the pandemic and rents soared. Now, that demand seems to be tapering off. Rents are down as much as 28% during the summer of 2021. Self-storage companies are increasingly offering promotions to hook customers.
One reason could be that Americans are going back to the office so they are not as desperate to declutter their homes because they are out of the house most of the time. Another possible reason is that people are not buying and selling their homes as much now that rates are about 7%. Therefore, they don’t need a storage locker to store their stuff. While there may be a soft landing, here is certainly a slowing economy and housing market.
2021 and 2022 were the best years for self storage companies as far as rate and occupancy growth. They could charge hefty rents and also get most of their storage units rented out.
Summer is the peak season for storage facilities but the current demand is at its lowest level in three years. Rents are 8% lower today than the second quarter of 2022.
IF we look at the FTSE Nariet Equity Self Storage index, we can see a 20% fall since 2021. This same index soared 95% between March 2020 and the end of 2021.
The national average occupancy rate for self-storage is 92% versus a record of the record of 96% during the pandemic.
The abnormally high demand is giving way to more normalized levels.
About 10.6% of Americans rented self storage facilities in 2020 verys 2.7% in the 1980s.
Looking ahead, construction costs are very high and financing projects is very expensive because interest rates are so high. We likely will not see a ton of supply of self-storage facilities coming onto the market. A lot of us are king of stuck in golden handcuffs where we can’t move because our mortgage rates are 3% or 4%. Check out my other videos about why you should not pay off your mortgage early. If I had to guess, I would say that at some point the rates for self storage are going to stop decreasing. Families are going to get larger and acquire more stuff and people are going to start moving their junk back into self storage but that could take months or years before the demand picks up again. It is kind of a confusing situation in the market in general right now, as well as self storage specifically. I do think rental rates for storage may continue to fall for the short term future.
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