Heavy Supply Continues to Pressure Self Storage Rents

New projects coming online have continued to pressure self storage rents, which have dropped by 2.5 percent nationally.
Self Storage Under Construction & Planned Percent of Existing Inventory

As self storage deliveries remained elevated, rent rates continued to decline in September. On a year-over-year basis, street rates slid 2.5 percent for the average 10×10-non-climate-controlled and 3.7 percent for climate-controlled units of similar size.

Over the past 12 months, street rate performance was positive only in three top markets tracked by Yardi Matrix. Limited supply led to increased rents in Las Vegas (4.3 percent) and the Inland Empire (1.8 percent), as well as in Columbus (1.1 percent), where strong economic trends continue to drive demand. At the other end of the spectrum, the large inventory pushed rent rates down by 9.6 percent in Charleston, N.C.

Asking rates in September were still highest in West Coast markets with San Francisco on the top ($193), followed by Los Angeles ($183) and San Jose ($175). Houston ($85) ranked at the bottom of the list, as heavy supply continued to hinder growth. The metro also had the lowest percentage of new development under construction, at 3.9 percent of existing stock.

Nationally, projects under construction or in the planning stages accounted for 9.4 percent of total inventory, a 10-basis-point increase over the previous month. Despite the lingering rent decline, development activity is still elevated in several top markets. Nashville is leading the way, where projects under construction or in the planning stages represented 21 percent of existing stock. The top three is rounded out by Portland (20.6 percent) and Seattle (18.4 percent).

Although New York City is dealing with strict zoning regulations and has limited land available for new construction, the metro’s development pipeline is one of the highest in the country (17.7 percent)—there were 52 projects under construction and an additional 100 in the planning stages as of September.

Read the full Yardi Matrix report