The self storage industry continues to perform well. National street rate performance has remained strong throughout 2022, following a banner year in 2021. While rate growth is moderating nationally and across markets, net income is growing rapidly as operators push rates of existing customers. However, we expect to see further moderation of street rates in the second half of the year with the potential for the industry to return to negative street rent growth.
On a market level, rate growth is tempering across major and tertiary markets. Street rate performance in markets appears to be largely driven by population growth rather than the level of storage penetration in a market. Especially as rates remain the strongest in high-growth markets in the South, Southeast and Southwest, despite high levels of available storage supply.
This solid rate growth and healthy demand has supported robust new construction starts for the self storage industry. As a result, the new-supply pipeline has been steadily increasing since the start of the second quarter of 2022, renewing some fears of oversupply in select markets. However, rising costs and extended construction timelines will likely moderate the pace of new supply over the coming years.
RV and boat storage facilities may only be a small niche equal to roughly 3-5% of the total U.S. self storage industry, but with business booming recently, this niche is starting to draw a lot of attention. Demand for this distinctive storage type is surging due to the increasing use of RVs and boats, as well as the growing efforts of local organizations to prohibit their storage in residential areas. As the sector grows, it continues to attract investor interest, seeing record-high transaction activity in 2021. However, due to due to unique considerations and constraints in developing RV and boat storage facilities, the amount of new supply being delivered hasn’t met recent demand. Overall, the RV and boat storage niche appears to be in the beginning stages of growth, so it will be interesting to see how it evolves in coming years.