National Self Storage Builders have experienced record growth over the past two years. Self Storage industry growth has been driven by major life-altering events such as divorce, death, disaster, and dislocation. Beyond these traditional demand drivers, the pandemic added new factors to the equation. Shifts to remote work and relocations and the need for businesses to store goods and supplies locally have been major demand drivers across the sector.
As a result, the sector recorded a substantial uptick in both occupancy and rental rates across the U.S. Self-storage rents reached historical highs in 2021, and experts are optimistic that this sector will continue to perform well this year, according to the latest National Self Storage Monthly Report from Yardi® Matrix.
As the year progresses, most operators are seeing uncharacteristically high occupancy rates, giving them the possibility to maintain and ultimately increase street rates, according to this same Yardi Matrix report.
The national street rates for a 10×10 non-climate-controlled units grew 6.7% on a year-over-year basis in December 2021, while rates for 10×10 climate-controlled units increased 7.4%, down 80 basis points from the gains recorded in the previous month. Despite cooling rents, the growth rates are well above of where they were in December 2020, when national increases were 2.3% for 10×10 non-climate-controlled and 3.5% for climate-controlled units.
Overall, no metros in the top 30 markets tracked by 3rd party analytical groups recorded negative rate performance on a year-over-year basis. A total of 22 markets saw 5 percent or higher rent growth in the non-climate-controlled category and 19 markets registered the same growth in the climate-controlled category.
Nonetheless, on a month-over-month basis in January, national rates for 10×10 non-climate-controlled units declined by $1 to $127, and rates for the same-size climate-controlled units also fell $1 for the third consecutive month to $145.
While some short-term demand drivers have dissipated, the long-term need for storage space is bolstered by several demographic trends, including Millennial family formation, downsizing retirees, and accelerated migration across the U.S.
The pandemic also urged many people to leave expensive urban centers in favor of suburban areas and smaller, lower-cost cities. This migration trend will likely persist in 2022, benefiting the storage sector.
Although self-storage rents are coming off record-high gains seen in 2021, industry experts expect robust growth in 2022. Most operators will start the spring leasing season on a high note, with strong occupancy rates, giving them the possibility to maintain and ultimately increase street rates.
Nationally, projects under construction or in the planning stages accounted for 8.9% of total stock, up 10 basis points over the previous month. The number of storage facilities under construction increased by 24 to 719, while the number of planned projects dropped by four to 1,252. Overall, there were 3,022 self-storage properties in various stages of development as of December 2021.
New York continues to have the most robust pipeline, with projects under construction or in the planning stages equal to 19% of total inventory, up 40 basis points over November. Las Vegas was second on the list—the metro’s new-supply pipeline increased from 15% in November to 15.6% in December 2021.
Although industry experts expect occupancy and rental rates to slightly moderate this year, the shift in the way people live and work will likely continue to foster a competitive environment for the self-storage sector in 2022. And due to healthy market fundamentals, investor interest is also set to remain high.
All in all, thanks to the record-setting performance over 2021, the self-storage sector is set for another strong year.
If you’re looking to invest in a self-storage project, Forge Building Company would love to help. We partner with top-notch investors and developers nationwide. With over 15 years of experience in this space, we will provide all the necessary information needed for your project to be a success from start to finish.
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