Industrial

Halfway through a year of transition, the self-storage sector continues to undergo changing investor dynamics while feeling the effects of political uncertainty in Washington. Yet opportunities abound, particularly in the Midwest, where a moderate development pipeline has kept supply in check with demand. We’re currently witnessing a pool of buyers rethink their approach amid rising interest rates and a lack of tax and policy guidance. As a result, large self-storage real estate investment trusts have tempered growth expectations as development activity puts upward pressure on vacancy, and rent growth moderates. This may present an opening for small to midsize buyers to enter the market or expand their existing portfolios. Meanwhile, sellers are looking to capitalize on elevated valuations. Yet, the climate of higher interest rates will likely bring lower cash-on-cash returns and put upward pressure on cap rates. Favorable fundamentals Nationwide, self-storage is currently downshifting to a more sustainable growth trajectory after years of rampant expansion. Newly employed millennials are finally moving out on their own, spurring household formation. Baby boomers are also leaving the family nest as they look to downsize. These societal shifts, along with the current economic landscape, are driving a demand for space and keeping vacancy …