Self-Storage Development Boom Causes Rental Rates to Dip, Says Yardi Matrix
SANTA BARBARA, CALIF. — Rental rates are on the decline for the U.S. self-storage market as owners look to increase absorption of their new supply, according to a December self-storage report from research firm Yardi Matrix.
Overall asking rents for 10-by-10-foot, non-climate-controlled units declined by 4.1 percent year-over-year in November, while rents for climate-controlled units of similar sizes dropped by 2.2 percent. The report cites that there may be some seasonality behind the rental rate decline, but new self-storage completions are the main culprit for the downward pressure.
Units under construction and in the planning stages currently account for 9.7 percent of the existing national inventory, a 10-basis-point increase over November, reflecting construction starts in high-demand markets.
Development activity is most pronounced in Portland and Nashville, where projects in the pipeline account for 29.7 percent and 23.7 percent of inventory, respectively.
In New York City, planned and under-construction projects represent 16.1 percent of existing inventory. That said, the market’s inventory per person of around 3 net square feet is still only half the national average of 6 net square feet per person, according to Yardi Matrix.
Only three of the major markets tracked (Las Vegas, San Diego and Inland Empire) showed rental rate increases for both non-climate-controlled and climate-controlled inventory. Rent growth was highest in Las Vegas (3.1 percent year-over-year for non-climate controlled units) as the market proves to be a popular destination for retirees priced out of California, according to Yardi.
Yardi Matrix’s December 2018 report compiles data from more than 26,000 U.S. self-storage properties, including more than 2,000 properties in the development pipeline.
To read the full report, click here.
Established in 1984, Yardi is based in Santa Barbara, Calif., and serves clients worldwide. The firm develops and supports investment and property management software for all types and sizes of real estate companies. Yardi Matrix researches and reports on multifamily, office and self-storage properties across the United States.
— Staff Reports