Though rent growth has moderated, none of the metros Yardi tracks has seen negative street rate growth for either unit type.
The self-storage sector became an investor darling in 2021 thanks to strong rent growth and high occupancy rates driven in part by changing consumer trends, and 2022 is on track to be another banner year.
The rate growth for 10×10 non-climate controlled units hit 8.5% last year, according to Yardi Matrix, and while similarly dizzying rates are not likely this year, the firm still predicts strong growth in 2022. National street rates for similar units remained at 6.7% growth in December, while rates for climate controlled units fell to 7.4%.
And though rent growth has moderated, none of the metros Yardi tracks has seen negative street rate growth for either unit type. Rent growth was 5% or more in 22 of the top 30 markets for non-climate controlled units and in 19 of the top markets for climate-controlled units. Street rates for 10×10 non climate controlled units ticked up $1 to $127 in December, while rates for climate controlled units of the same size decreased by $1 for the third consecutive month to $145.
Operators have kicked off the year thus far with confidence, according to Yardi, as the pandemic, WFH trends and a robust housing market have kicked off new migration patterns that are driving the market.
“The reasons for optimism include the expansion of the traditional ‘4Ds’ of self storage demand: death, divorce, dislocation and disaster,” Yardi analysts write in the report. “Self storage executives see robust demand not only from traditional drivers but from two additional Ds: decluttering and distribution/business demand.”
Operators are also looking to new uses for self-storage properties, including for distribution and logistics facilities. Properties near population centers “are perfectly located for last-mile delivery,” Joseph Saffire, chief executive of Life Storage, told YardiMatrix. “We are working on providing the tools that allow retailers and e-commerce sellers to use self storage to support their logistics needs.”
Yardi is also tracking more than 3,000 self storage properties nationally in various stages of development, including 734 under construction, 1,285 planned and 508 prospective properties. The new supply pipeline nationally is pegged at 8.9% of existing stock. Growth has been concentrated in secondary markets across the South, Southwest, and West, especially in Las Vegas, Phoenix, and Dallas, as well as the “Acela corridor” in the Northeast.
The vacancy rate for self-storage is expected to reach 11.5% by 2025 and 10.1% by the end of the 10-year forecast in 2030, according to Moody’s.