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  • Writer's pictureRealFacts Editorial Team

Self Storage Street Rates Racing to the Bottom

self storage containers

In today's self-storage industry, operators are facing a multitude of challenges, from pricing uncertainties to financing difficulties, and a notable "race to the bottom" on street rates, especially among public companies. This assessment comes from a recent report by Yardi, shedding light on the complex dynamics affecting the sector.

Street rate growth has continued to decline year-over-year across all major metros. The average annualized same-store asking rent per square foot has dropped by 4.5%, with an additional 3.8% decrease since last month. REITs (Real Estate Investment Trusts) have been particularly aggressive in pushing rates down, aiming to attract new customers in a competitive market.

While larger companies with REITs have been leading this price drop, smaller operators are feeling the pressure to follow suit to maintain occupancy levels, albeit at a slower pace. According to Yardi Matrix, same-store street rate growth for all REITs was at -6.6% year-over-year, nearly double the decrease seen in non-REIT-owned properties.

Despite the expectation of rising street rates during the typically busy leasing season, recent trends have disappointed. Since 2017, street rates nationwide have usually seen positive growth between February and March, but this year, March's performance has dampened hopes of a turnaround.

The lack of transparency in in-place rates has added to the industry's uncertainty, affecting acquisition and development decisions. However, despite these challenges, developers are forging ahead with projects, indicating steady interest in construction.

Yardi's supply data shows that space under construction as a percentage of existing inventory has remained stable at 3.7% through March, with many top metros seeing an increase or at least no decrease in their construction pipelines. Notably, Orlando and Tampa stand out as bright spots in this landscape. Orlando, with its supply as a percentage of inventory significantly higher than other metros, and Tampa, both show resilience and promise.

Portland has seen the most significant increase in construction activity, up by 50 basis points month-over-month. However, despite this increase, the new-supply pipeline remains relatively small, and new-supply deliveries have been low, equal to only 0.4% of starting inventory.

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