When Will Self Storage Supply Reach it's Peak?

A recent report from Yardi Matrix indicates a significant change in the self-storage industry, with expectations of decreased new supply post-2025.

Immediate Surge in Market

The storage market currently experiences a surge, with forecasted deliveries for 2024 and 2025 increasing by 10.9% and 12.5%, respectively. Construction rates have risen by 8.3% quarter-over-quarter and 11.3% year-over-year, resulting in 60.1 million net rentable square feet for properties opened before 2020. Steadying completion times reflect robust development primarily driven by new projects.

Future Projections

Forecasts for 2026 to 2029 show a downward revision, with expected growth rates for new supplies declining to around 2.0% for 2026 and 2027, further decreasing to 1.5% for 2028 and 2029. Notably, there's a significant reduction in new supply expected for 2028 compared to previous estimates.

Moderating Construction Trends

While still above long-term averages, construction durations are moderating. The increase in abandoned and deferred projects, coupled with stagnation in planned and prospective pipelines, suggests waning interest in self-storage development. Negative year-over-year changes in street rates for 2023 further support this trend.

Pipeline and Market Sentiment

The planned pipeline expanded slightly in Q4 2023, growing by 1.43% to 114.0 million NRSF. Conversely, the prospective pipeline remained relatively stagnant throughout the year. Deferred status properties increased significantly by 44.5% year-over-year, alongside a noticeable rise in abandoned storage properties, indicating a shift in market sentiment.

Contradictory Growth Trends

Despite earlier predictions of slowdown, the self-storage sector experienced unexpected growth towards the end of 2023. However, long-term forecasts have been significantly scaled back, aligning with more conservative growth expectations reflecting changing market dynamics and developer sentiments.