Top 10 Markets for Self Storage Rent Growth
- May 25, 2021
The self storage sector has established itself as a strong performer, despite troublesome market conditions over the past year. Thanks to its countercyclical nature and low sensitivity to changes in the economy, the sector could capitalize on the demand fueled by the pandemic-induced relocations and displacements across the country, leading to stable rent improvements over the past 12 months.
READ ALSO: Will Self Storage Prosper After COVID-19?
On a national level, street-rate rents rose 8 percent for the average 10×10 non-climate-controlled and 9.5 percent for climate-controlled units of similar size, year-over-year as of April. Overall, annual street-rate performance was positive in all of the top markets tracked by Yardi Matrix, for both the standard 10×10 non-climate- and climate-controlled units in April.
Below we ranked the top 10 self storage markets with the highest rent growth for the standard 10×10 climate-controlled units year-over-year as of April, based on Yardi Matrix data.
|Rank||Market||Rent 10×10 CC Units April-20||Rent 10×10 CC Units April-21||Percent Change|
|1||San Jose, Calif.||$158||$186||17.7%|
Source: Yardi Matrix
Atlanta’s relatively lower cost of living and substantial corporate presence fueled population growth in the metro over the past decade, adding 720,000 residents between 2010 and 2019. The health crisis also changed lifestyle preferences, prompting people to leave major coastal cities in favor of smaller markets. Although Atlanta’s storage market is somewhat oversupplied, with 8.3 net square feet of storage space available per person, above the 6.8 national figure, street-rate rents were up for both the standard 10×10 climate- and non-climate-controlled units by 11.2 percent and 9.8 percent, respectively, year-over-year in April.
The metro also experienced rent growth on a month-over-month basis, up 2.6 percent for the standard 10×10 climate-controlled and 2 percent for same-sized non-climate-controlled units. The average asking rent stood at $119 for climate-controlled units and $101 for non-climate-controlled units.
Over the past five years, Denver has expanded its self storage stock by nearly 9 million square feet, putting significant pressure on rent rates across the metro. However, the pent-up demand created by the pandemic brought relief for self storage operators. Despite being slightly oversaturated, with 7.7 net square feet of storage space available per capita, street-rate rents rose 11.6 percent for the average 10×10 climate-controlled units in Denver, from $121 in April 2020 to $135 in April 2021.
Denver also recorded positive rent performance for the standard 10×10 non-climate-controlled units, up 6.1 percent year-over-year, with asking rates reaching $121. From March to April, street-rate rents increased 2.3 percent for the standard 10×10 climate-controlled and 1.7 percent for the non-climate-controlled units of similar size.
Since the onset of the pandemic, Denver has experienced a slowdown in development activity. Last year only two facilities came online, encompassing 160,584 square feet. As of April, the metro had around 1.4 million square feet of storage space under construction or in the planning stages, accounting for 5.1 percent of Denver’s total inventory.
As a result of the self storage development surge in 2018, Houston has become significantly oversupplied. In an attempt to balance supply and demand, the metro was forced to limit its new-supply pipeline, while rent rates continued to decline. Due to a shift to remote working, online learning, consolidation of households and business closures, demand for self storage has increased substantially over the past year, driving up self storage occupancy to record levels in the metro.
On a year-over-year basis, street-rate rents grew 12.2 percent for the average 10×10 climate-controlled and 8.6 percent for the non-climate-controlled units of similar size. Whereas on a month-over-month basis, Houston saw a 1.9 percent and 1.1 percent uptick for the standard climate- and non-climate-controlled units.
Despite the robust rent growth over the past few months, developers remain cautious, as heavy new deliveries could put more pressure on rents in the future. As of April, projects under construction or in the planning phases accounted for 2.1 percent of Houston’s inventory of more than 64 million.
7. Austin, Texas
Austin’s self storage market is also considerably oversupplied, with a per-person inventory of 9.9 net square feet. Last year, developers in Austin completed 11 facilities, adding more than 1 million square feet to its existing inventory. As of April, the metro had 20 projects under construction or in the planning stages, accounting for 5.6 percent of total stock.
Although heavy new supply usually pressures rent rates, thanks to continuous in-migration and corporate relocations, Austin’s new supply gets absorbed relatively fast. In 2019, the metro gained 58,767 residents, up 2.7 percent and nine times the 0.3 percent national rate. As the pandemic causes shifts in demographics, Austin will likely remain a popular destination for relocating residents and companies alike.
Street-rate rents rose 12.4 percent for the average 10×10 climate-controlled and 10.8 percent for the non-climate-controlled units of similar size, year-over-year as of April. Austin also recorded substantial rate growth on a month-over-month basis, up 2.4 percent for the standard 10×10 climate-controlled and 2 percent for non-climate-controlled units of similar size.
6. Charlotte, N.C.
Charlotte has been steadily expanding in the past decade, with its population increasing by 17.5 percent since the 2010 census, according to July 2019 estimates. COVID-19 has reinforced this trend, accelerating migration to Charlotte and other Sun Belt metros, as people continue to relocate from densely populated gateway markets.
In line with other metros in this list, Charlotte’s self storage market remained resilient due to positive demographic trends. Street-rate rents rose 13 percent for the average 10×10 climate-controlled units, with asking rates reaching $113 year-over-year in April.
Similar-sized non-climate-controlled units also saw significant improvement, increasing by 11.3 percent on an annual basis in April. Overall, rent performance was positive or flat every month in Charlotte, after the initial dip at the onset of the health crisis.
READ ALSO: Top 10 Markets for Self Storage Construction
5. Washington, D.C.
Thanks to the federal government and related industries, Washington, D.C., was able to maintain a generally strong economy throughout the health crisis compared to other large coastal markets. In contrast with other markets, population growth in the metro slowed down between 2010 and 2019, compared to the 1.7 percent uptick at the beginning of the decade, when the metro added more than 100,000 residents.
Despite the sluggish demographic trends, the health crisis fueled the need for self storage space in most of 2020. Street rates increased 13 percent year-over-year in April for the average 10×10 climate-controlled units and 9.5 percent for non-climate-controlled units of similar size.
On a month-over-month basis, Washington, D.C., recorded a 2 percent and 2.7 percent uptick for the 10×10 climate- and non-climate-controlled units, respectively. Thanks to the metro’s moderate storage supply, equal to 5.3 net square feet per capita, the metro might continue to see improving rent rates in the coming months.
Miami’s self storage market has been able to capitalize on the metro’s diversifying economy and rapidly expanding housing stock in recent years. Although the health crisis has put pressure on the metro’s economy, the storage sector remained resilient, with positive rent performance through most of the third and fourth quarters of 2020. Despite a slight dip in the first quarter, Miami led the top markets in rent growth for 10×10 non-climate-controlled units year-over-year in April, increasing 15.1 percent. Street rates for the 10×10 climate-controlled units also grew 14.7 percent.
From March to April, street rates rose 3.1 percent for the standard 10×10 climate-controlled and 3.6 percent for non-climate-controlled units of similar size. Miami’s per-person storage supply equates to 6.6 net square feet, slightly below the 6.8 national average, which might further support rate performance.
3. Inland Empire
The Inland Empire has been benefiting from the ongoing exodus from more expensive California markets. Compared to April 2020, street-rate rents grew 14.8 percent for the standard 10×10 climate-controlled units and 11.6 percent for the same-sized non-climate-controlled units. The asking rates were $163 and $125 for the 10×10 climate-controlled and non-climate-controlled units.
The region also recorded strong month-over-month performance—street-rate rents increased 2.5 percent for the average 10×10 climate-controlled units and 1.6 percent for non-climate-controlled units. Although the Inland Empire has 7.4 net square feet of storage space available per capita, slightly above the 6.8 national figure, the region will continue to benefit from people seeking to live in less dense, suburban areas.
2. Charleston, S.C.
Despite an existing inventory of 11.5 net square feet available per person, above the 6.8 national figure, Charleston saw significant rent improvement year-over-year in April. Street-rate rents rose 16.8 percent for the average 10×10 climate-controlled units, from $107 in April 2020 to $125 in April 2021. Non-climate-controlled units also saw substantial growth year-over-year in April, up 8.1 percent, with asking rates reaching $94.
While the pandemic-induced demand will likely continue to put upward pressure on rents in Charleston, developers remain cautious as the metro is considerably oversupplied. As of April, the metro had a total of 464,374 square feet of storage space under construction or in the planning stages, accounting for 3.8 percent of existing inventory.
1. San Jose, Calif.
As a high barrier-to-entry market, with strict zoning regulations and limited opportunity for development, San Jose’s storage sector has been historically undersupplied. With more than 9.6 million square feet of storage space available, the supply per person is at just 4.8 net square feet.
Low supply, coupled with the pent-up demand created by the health crisis, has been driving up rent rates in San Jose. On a year-over-year basis, street-rate rents increased 17.7 percent for the average 10×10 climate-controlled units, with asking rates reaching $186, while street-rate rents for the 10×10 non-climate-controlled units saw a 13 percent uptick, reaching $183.