Self-Storage Demand Continues to Drive Up Rents
Southeast leads rent growth as rates hit historic highs and renewals extend length of stays.
The self-storage sector continued to see strong demand from new customers in April while an increasing number of customers are opting to renew their units at high rates with extended length of stays, according to a new National Self Storage monthly report from Yardi Matrix.
“It all points to continued growth in rents and net operating income, which has increased (by) 20% for some REITs over the past year,” the Yardi Matrix report said.
Street rates, the monthly rental rates quoted to new tenants, are hitting historic highs, the report said. The $130 average rate in April for 10×10 units that are not climate-controlled matching a peak last reached in August 2021. The $147 average for climate-controlled units is within $2 of the highest rate historically.
The monthly report said the New York metro has the largest pipeline of new self-storage inventory, with more than 13.5M SF in development, under construction or in the planning phase.
The National Self-Storage monthly report said street rates for 10×10 units (not climate-controlled) nationally increased 4.8% YOY in April; street rates for climate-controlled units increased 4.3% YOY, the report said. Yardi Matrix tracks more than 32K self-storage facilities.
Metros in the Southeast continue to see the highest street rate growth in self-storage, with the same five markets leading the YOY April rate growth rankings in the report for each type of storage unit: Atlanta, Charleston, Charlotte, Miami and Tampa.
“Demand in the Southeast has benefitted from many factors, including the booming home-sale market, the large amount of in-migration from people taking advantage of work-from-home policies, and movement around college campuses,” the report said.
Earlier this month, Investment management giant Barings announced it has formed a joint venture with Canvass Capital to acquire and develop self-storage properties throughout the Southeastern US.
The joint venture of the two real estate investment managers plans to invest up to $250M of equity into acquiring and developing self-storage space in the Southeast over the next few years. The partnership recently closed on the acquisition of three self-storage assets in the Lake Norman region north of Charlotte, NC.
Record-high occupancy rates and returns that outperformed all other REIT sectors in 2021 have the six self-storage REITs engaged in an intense competition for market share that has fueled a binge of acquisitions in the fragmented sector.
Public Storage, the largest self-storage REIT, achieved weighted average occupancy 96.3% in 2021, according to a recent analysis in The Motley Fool.