Texas

Developers of self-storage properties in major Texas cities are consciously putting the brakes on new construction as they wait for excess supply to be absorbed and for positive rent growth to return to the market. The market has been moving in this direction for some time. While property owners have generally maintained occupancy rates that meet pro forma thresholds for profitability, rent growth has been and will likely remain stunted. Supply growth has led to competitors cannibalizing each other’s market shares. In addition, ever-rising construction costs and a dwindling inventory of buildable sites are also governing the pace of new self-storage development. While certain pockets of developable sites still exist here and there, lenders and equity providers have also taken note of the saturated landscape and are tightening their purse strings for self-storage projects. “With respect to major markets, there’s no question that the pipeline is thinning out, and for projects that haven’t yet started construction, probably half of those proposed won’t come to fruition during this cycle,” says Bill Brownfield, owner of Brownfield & Associates, the Houston-based branch of industry-tracking firm Argus Self-Storage. “Markets are largely stabilized in terms of occupancy. But rent concessions and discounts have not only …