Self-Storage Street Rates Slump, Still Above Pre-Pandemic Norms
Self-storage street rates decelerated last month but are still 10% higher than pre-pandemic levels.
Street rates for self-storage units decelerated in November but remain 10% higher than pre-pandemic levels, as occupancy remains high and operators move rents higher for existing customers, according to recent research from Yardi.
The overall average national street rate, which includes all unit sizes for both non-climate-controlled and climate-controlled units Yardi tracks, clocked in at $142 in November, the lowest level in 17 months. Larger units performed the best, however, and boosted the overall average. Non-climate controlled 10×10 units’ street rates increased year over year in 11 of the top 31 metros Yardi tracked in November. Meanwhile for 10×10 climate controlled units, just five of the top 31 had positive growth.
And 84% of Yardi Matrix’s top 31 metros posted a month-over-month decrease in street rates for 10×10 units in November, with street rates for 10×10 units combined dropping by $2 in 10 markets and $3 in another four markets on a monthly basis, led by Philadelphia with a $4 drop from October to November.
The largest year over year decreases in street rates for 10×10 non climate controlled units were in Philadelphia and Pittsburgh, where rates fell by 6.2% and 4.4% respectively. Rates for climate controlled units of the same size fell 6.3% in Philadelphia and 8.3% in Pittsburgh.
“Street rates are negative year-over-year in most metros, but Sun Belt markets continue to hold up better than other parts of the country,” Yardi analysts note. And as for month over month trends, “the tempering of street rates is not a surprise given normal seasonal patterns,” they say. “Many operators remain confident that demand will hold up over the winter.”
The development pipeline is expected to “gradually slow” as banks tighten underwriting for construction loans amid larger economic headwinds. A total of 4,536 self storage properties are currently in various stages of development nationally, including 1,721 planned, 828 under-construction and 644 prospective properties.
“Economic conditions continue to be healthy, as the labor market remains tight and inflationary pressures eased slightly in October, but rising inter- est rates increase the chance of a downturn in late 2023,” Yardi analysts not. “Though storage is well positioned relative to other property sectors, the economy is a potential headwind.”