- Street rate growth reaches record pace in many markets across the country
- Larger units seeing faster increases than smaller units
- New demand drives high utilization rates across the storage industry
Street rates in self storage have been growing rapidly in 2021 after a strong 2020 despite the impact of COVID-19. Storage demand has emerged from a number of new sources as well as some traditional demand drivers like domestic migration. A key theme over the past 18 months has been the need for more space, as people are spending the vast majority of their days at home. More space has meant upsizing to larger homes and apartments, it has meant clearing out extra bedrooms and living areas to make home offices and home schools, and on the business side, it has meant changing the layout of your space in order to allow for social distancing. All of these have led to a boost in demand for self storage.
In almost all markets, street rate growth on an annual basis has reached record levels. And this has been a welcome sight for much of the industry, as owners, operators and developers had been mired in a years-long street rate slump due to the onslaught of supply delivered in 2015-2018. Among the top 30 markets tracked by Yardi Matrix, 20 had annual street rate growth of 10% or more. Many markets are now at or above all time street rate records, and the growth seems likely to continue, at least in the near term. Storage REITs are reporting very strong occupancy levels, and while developers are beginning to add projects to the pipeline, the new supply will take time to complete.
Street rates are growing even faster for large units than small units. Manhattan recently made news, with some 10×30 units renting for more than $1,000 per month. While this does not reflect the national rate for large units, it is indicative of the demand for large units, especially in places like New York, where many people fled during COVID and are slowly coming back. The 10×30 unit size is likely rented by someone in need of significant space, perhaps those who gave up their apartment leases and rode out the pandemic in more remote places. In other parts of the country, the demand for large units reflects the demand and consumption of new boats, recreational vehicles and outdoor equipment. Purchases of these high-end goods went through the roof last year, and consumer need a place to store them, especially with winter approaching in the coming months.
As we enter the winter months, street rates may cool as is typically the seasonal pattern, however given the strength of the industry, we don’t expect a major slow down. There is significant transcendent demand in the sector, and until utilization drops precipitously or supply jumps, street rates should continue to see positive growth trajectories for the foreseeable future.