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  • Writer's pictureRealFacts Editorial Team

Economic Factors Influencing the Self-Storage Industry in 2024


Public storage facility

The self-storage industry, known for its resilience, is currently navigating significant economic challenges. As detailed by Austin McLeod from Inside Self Storage, factors such as inflation, a sluggish housing market, and shifting consumer demand are impacting developers, investors, and owners in the sector.


In recent years, the self-storage sector has experienced substantial growth. According to Yardi Matrix, the number of people using self-storage increased to 14.5 million in 2022, up by nearly one million users since 2020. Facility owners have enjoyed robust returns, with an average annual ROI of approximately 17% over the past nine years, as reported by Real Estate Daily News.


However, the past year has introduced new challenges. Declines in self-storage rental and occupancy rates have been observed, driven by rising interest rates, slow home sales, and changing migration patterns. These economic pressures have led to decreased demand in the self-storage market.


Interest rate volatility has significantly affected the financial markets, including self-storage. Rising short-term rates have made it difficult for developers and owners to secure construction and other loans. This financial strain has contributed to a 40% drop in the number of facility sales in the U.S. in 2023 compared to 2021. Although this environment is challenging for debt-heavy owners, it presents opportunities for well-capitalized investors.


The self-storage industry's performance is closely linked to the housing market. In late 2023, the national average 30-year mortgage rate rose to 7.98%, causing a 0.7% year-over-year decline in home sales, according to the National Association of Realtors. High home prices and limited inventory have further reduced demand for self-storage, impacting street rates.

The development pipeline for new self-storage facilities remains relatively stable, with 3.7% of existing inventory under construction as of March 2024. Despite performance challenges and a tight capital market, developer interest persists. However, an increase in abandoned or paused projects reflects the difficulties in financing new developments.


The self-storage industry has seen significant consolidation in recent years. For instance, Extra Space Storage's $12.7 billion acquisition of Life Storage in March 2023 created the largest storage operator in the U.S., with over 3,500 locations. Similarly, Public Storage's $2.2 billion purchase of Simply Self Storage highlights the trend towards greater operational efficiency through consolidation.


As of March 2024, the average annualized asking rent per square foot for self-storage units was $16.25, down 4.5% from the previous year. Non-climate-controlled units saw a 4.2% year-over-year decline in street rates, while climate-controlled units experienced a 4.9% decrease.


Looking ahead, the self-storage market is expected to continue facing economic challenges. The Federal Reserve's decision to maintain interest rates has dampened hopes for significant rate cuts in the near future. Consequently, leasing velocity may remain slow, and investors are advised to be cautious when evaluating new opportunities and development sites. A significant uptick in demand is unlikely until interest rates decrease.


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