Self Storage Operators Remain Optimistic
Although occupancy rates have slightly dropped over the winter, rates continue to hold steady.
- National street rates increased 7.6% for 10×10 NON CC and 7.4% for 10×10 CC units
- Rates for 10×10 NON CC units stayed flat, at $128, and for CC units fell $1 to $145
- Development activity remained strong, with the new supply-pipeline accounting for 8.9% of total inventory
National street rates remained healthy and changed little sequentially in January. On a year-over-year basis, street-rate rents increased 7.6% for the average 10×10 non-climate-controlled and 7.4% for the climate-controlled units of similar size. From December to January, national rates stayed flat for 10×10 non-climate-controlled units, at $128, while rates for same-size climate-controlled units fell $1 to $145.
Overall, no metros in the top 31 markets tracked by Yardi Matrix recorded negative rate performance on an annual basis. A total of 11 markets saw 10% percent or higher rent growth in the non-climate-controlled category and 25 markets registered at least 5% growth. Climate-controlled units recorded similar performance, with 11 markets registering double-digit rent growth and 22 markets experiencing at least 5% improvement.
Optimism Prevails Among Operators
Occupancy rates have slightly contracted due to increased move-outs in recent months; however, this won’t cause concerns considering that properties recorded high occupancy going into the seasonal lull. Operators are leaning toward maintaining street rates at the risk of losing some customers, instead of cutting rent rates.
Strong demographic growth continues to drive the sector’s positive performance across the South and Southwest. For 10×10 non-climate-controlled units, growth was highest in Atlanta (17.5%), Miami (16.8%), Charlotte (12.8%), Phoenix (12.6%) and Charleston, S.C. (11.8%).
This also demonstrates that currently there’s little to no correlation between supply penetration and rent increases. Charleston, S.C., has 11.6 net square feet of storage space available per capita, above the 7 net square feet national average, and the highest completed per-person inventory among the top markets. Atlanta, Charlotte and Phoenix are also in the 7 to 9 net square feet range, while Miami’s inventory is at 6.8 net square feet per capita.
Construction Headwinds on the Horizon
Thanks to positive fundamentals, such as high demand and rent rates, developers are eager to continue to add new supply across the country. However, rising construction costs and lingering supply shortages will likely slow down development in the coming quarters.
As of January, projects under construction or in the planning stages accounted for 8.9% of existing inventory, up 10 basis points over December. There were 3,831 properties in various stages of development. This included 731 facilities under construction, 1,287 planned and 520 prospective projects.
Read the full Matrix National Self Storage Monthly-February 2022