Slow Absorption Hinders Self Storage Rent Growth

Although metros in the Desert Southwest maintained rent growth, street-rate rents continued to decline, at 3.3 percent across the country. The new-supply pipeline, however, reached peak levels.
Self Storage Under Construction & Planned Percent of Existing Inventory

Rents for the month of July continued to decrease as slow absorption is making its mark in high-supply markets. On a year-over-year basis street-rate rents have dropped 3.3 percent for 10×10 non-climate-controlled and 2.1 percent for 10×10 climate-controlled units. Metros in the Desert Southwest are still among the best-performing markets—Las Vegas and Phoenix maintained 11 and 5 percent growth year-over-year. In the Inland Empire strong demand for new supply has pushed rent rates up 3.8 percent for non-climate-controlled and 5.8 percent for climate-controlled units.

Despite the limited opportunity for new development, rent rates in Los Angeles remained relatively flat. Additionally, oversupplied markets in Texas will continue to face declining rent rates. Therefore, just as Houston and San Antonio have done, Dallas-Fort Worth and Austin are expected to witness a slight limiting of their construction pipelines in the near future. Nationwide, planned and under construction projects account for 9.1 percent of the total inventory, which represents a 40-basis-point increase since June and a new high point in development since the beginning of the year.

Substantial population growth fuels new development in metros such as Nashville (30.5 percent of inventory) and Portland (25.3 percent). Demand from college students encourages activity in Boston and Raleigh-Durham. The latter’s new supply pipeline represents 16.5 percent of existing inventory, up 110 basis points since last month. Moreover, retirement population and low housing prices continue to encourage development in Tampa, which proves to be one of the healthiest markets when it comes to new supply—8.8 percent.

Read the full Yardi Matrix report