With robust demand going into the spring leasing season, the self-storage industry is proving to be a resilient niche even with much of commercial real estate in disarray.
Street rates (the monthly rental rates that self-storage operators quote to prospective tenants) have returned to normal seasonal patterns during the first quarter, coming down from the record highs seen last year, according to Yardi Matrix. But they are staying firm and raising the likelihood of moderate increases as rental activity ramps up in the second quarter.
That’s a good place to be for an industry that’s set to add nearly 53 million square feet of space this year. More than one-fifth of Americans are currently renting self-storage units, according to storage search website StorageCafe, while another 15% are planning to do so in the future. The way that the COVID-19 pandemic changed how people live and work only increased the self-storage profile, while shifts in the development of other real estate asset classes are amplifying growth, according to Yardi business intelligence manager Doug Ressler.
“The storage market enjoys considerable momentum,” Ressler said. “The pandemic gave a huge boost to the trend for remote working, meaning that people need to create offices at home, and this only added to the traditional sources of demand.
“In addition to this, the new trend in multifamily development that sees apartment sizes shrinking nationally plus the shifting patterns in migration result in changing priorities about living arrangements, especially in places seeing a high inbound population flow. These factors and others may all encourage strong growth in the self-storage sector going forward.”
StorageCafe recently analyzed Google searches throughout 2022 in 150 cities nationwide, cultivating a ranking of markets by consumer interest in self-storage service. Unsurprisingly, New York, with its notoriously small apartment sizes, had the highest number of average monthly Google searches at 22,510. But searches are ramping up in Southwest cities too. Dallas, for example, was seventh in average monthly searches and had one of the largest spikes in searches from 2018 to 2022, jumping an astounding 273%. Houston, No. 3 in average searches, and Phoenix, at No. 9, also had staggering search growth over that time frame at 218% and 236%, respectively.
