Self Storage Street Rates Temper
Year-over-year, the national average street rate remains positive.
After what has been stellar performance for a long period of time, self storage rents took a step back in August, reaching an overall average street rate of $149. The rate of growth is still positive, at 1.4% year-over-year, but that’s 130 basis points lower than it was in July. Despite the short-term perspective, demand is still galvanized by apartment users, with the demographic seemingly broad-based, according to a recent RentCafe survey.
The national average street rate for 10×10 climate-controlled units plateaued at their June record high, at $151. Compared to July, rents fell $1 for 10×10 non-climate-controlled units. National street-rate rents for 10×10 non-climate-controlled units rose 150 basis points on a year-over-year basis in August, meanwhile, rates for the same-size climate-controlled units increased 130 basis points in the same period.
Taken as a whole, in-migration is still favoring secondary markets and continues to boost the self storage sector. On a yearly basis, eight of the top 31 metros tracked by Yardi Matrix recorded rate gains at or above 5 percent for 10×10 non-climate-controlled units, while rents fell in seven. Meanwhile, three of all major markets saw similar increases for 10×10 climate-controlled units, while 10 saw decreases.
Raleigh-Durham had the strongest annual gains for the 10×10 non-climate-controlled units at 9.4 percent, while Orlando’s 10×10 climate-controlled units saw 5.7 percent increases. At the other end of the spectrum, Pittsburgh registered the largest year-over-year negative rate growth in August, with street rates dropping 340 basis points for 10×10 non-climate-controlled units and a 740-basis-point decrease for similar-sized climate-controlled units.
In addition to the self storage sector’s reputation as an inflation hedge, mainly due to monthly leases that can be altered more often, another benefit is that market penetration seems to have little to no impact on rent growth. The top-performing metros—with a street rate gain of at least 3 percent—have a total inventory larger than the national average of 7.1 net rentable square feet per person.
Nationally, there were 760 self storage projects under construction as of August. In addition, the pipeline included more than twice as many (1,594) planned properties as well as 515 prospective projects. Combined with the underway developments the pipeline accounted for 10.3 percent of the total stock, marking a 20-basis-point improvement over July.
On a month-over-month basis, Phoenix led the major markets for development activity. Projects underway or in the planning and permitting stages increased 60 basis points, representing as a whole 14.2 percent of the metro’s existing inventory.
Head over to Yardi Matrix to read the full report.