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Self-storage’s pandemic glory days are over

10% drop in rents is largest on record

Public Storage CEO Joseph Russell, Jr.
Public Storage CEO Joseph Russell, Jr. (Illustration by The Real Deal with Getty, Public Storage)

Self-storage operators can pack away memories of the sector’s recent boom — those days are gone.

Rents and new leasing are suffering in the asset class, the Wall Street Journal reported. As home sales slow and workers spend more time at the office, self storage is no longer enjoying the success from the pandemic push to stash stuff and clear space for remote work, home schooling and the kids moving back in.

In the first quarter, rent for new customers fell 10 percent year-over-year to $15.45 per square foot, according to Green Street. The decline was the largest recorded by the firm in the decade it has spent tracking the sector.

New leasing activity this summer, meanwhile, is at its lowest level in three years. Summer is typically the peak season for storage.

A stock market index tells the tale of two eras for self-storage. From March 2020 to the end of 2021, the FTSE Nareit Equity Self Storage index rose 95 percent, outpacing the FTSE Nareit All REITs index by 64 percentage points. Since then, however, the self-storage index is down by more than 20 percent.

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During the pandemic, self-storage REITs sported an average occupancy above 96 percent — a record, according to Yardi Matrix. Today, occupancy is closer to 92 percent and large rent drops have unfolded in Austin, Miami and other markets.

“With the headwinds of a slowing economy and a muted housing market, demand levels will continue to feel pressure,” David Cramer, CEO of National Storage Affiliates Trust, said on a recent earnings call, the Journal reported.

Still, the fundamentals of self-storage remain strong. Americans continue to be avid consumers who inevitably run out of space for things or need to move items for employment or family reasons, but don’t want to part with anything.

Deal activity in the sector also rolls along. On Monday, Blackstone Real Estate Income Trust agreed to sell Simply Self Storage to Public Storage for $2.2 billion. Last week, Extra Space Storage and Life Storage finalized a $12.7 billion merger.

— Holden Walter-Warner

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Industrial Real EstateREITSSelf Storage