Is DFW Self Storage Staring Down Another Economic Slowdown?

DALLAS—Heavily favored by developers for years, self-storage construction has ramped up across the country with some markets becoming increasingly competitive and saturated. In recent years, the self-storage building spree in Texas was driven by the massive numbers of Americans relocating to the Sunbelt cities, Baby Boomer downsizing or the renter lifestyle of Millennials, who either by preference or necessity require extra space.

StorageCafe’s recent study focused on the dynamics of individual markets and the impact on self-storage developments. According to Yardi Matrix’s analysis, DFW is the third most active market and its self-storage supply flood took a serious toll on rents. Here’s why:

The total self-storage space inventory in the DFW metro area consists of more than 62.7 million square feet, in excess of 1,084 facilities, or the largest inventory level for any US metro.

Even though self-storage construction has slowed dramatically (-34% in 2019 compared to a record 2018), the pace of development is still elevated. The metro area recorded the addition of no less than 2 million square feet in 2019 spread over 24 new facilities.

“The biggest factor in the decline of the Dallas storage construction sector is most likely oversaturation in the market,” Francis Chantree, StorageCafe senior researcher, tells GlobeSt.com. “In 2019, after being in first or second place for several years regarding self-storage construction, Dallas-Fort Worth-Arlington fell to third place out of all US metros. That was a decrease of 1 million square feet in new deliveries from 2018 when the sector was at its peak there.”

However, this slowdown is not predicted to continue, Chantree says. Using Yardi Matrix data, it is forecast that the net amount of rental square footage added in 2020, seen as a proportion of 2018 inventory, will be 3.2%, which is an increase of 2.5% on the 2019 figure.

“It is not necessarily true that the Dallas self-storage sector is facing a major economic slowdown in the near future. For one thing, mobility is a major driver of the sector,” Chantree tells GlobeSt.com. “People need storage when they move home. And the US Census reported that in 2018, the mobility of metro Dallas residents was 15.5%, which was higher than the overall rates in both Texas, 15.3%, and the US as a whole, 14.1%. A healthy job market and the purchasing power which that gives people also promotes renting of storage units, and between 2017 and 2018, employment grew in the metro by 2.89%.”