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Self-Storage | 2022 Market Overview
The self-storage sector has seen exponential growth in the past two years due to COVID-19 increasing migration rates nationwide and displacing office workers as remote work ramped up. In 2021, self-storage saw sales volume rising 180 percent from the year prior, reaching $23.6 billion, according to Real Capital Analytics. However, 2022 has seen moderated numbers throughout the sector, resulting from a decrease in home sales and consumers holding back on spending money on non-essential items. Inflation rates rising are forcing consumers to rethink where they are spending money, causing self-storage facilities to pivot their strategy to bring in customers. The average rate per unit did decrease marginally year-over-year. Despite the recent slowdown, the self-storage market is still performing well-above pre-pandemic levels.
Market Outlook
Self-storage continues to grab investors’ interest and capital. As consumers return back to the office and migration curbs, the sector will experience a shift in rental rates and demand, but fundamentals remain strong and have set the self-storage market up for success in the long term. As the market expands, more opportunities will arise, specifically in storing large recreational items, and technology will begin to cater to younger generations helping carry on consumer demand.
Self-storage has grown to more than 1.6 billion square feet of space in 2022. Over the span of the last 5 years, 255.7 million square feet of storage space was built – that’s equivalent to 15.7% of the total inventory.
Rents/Vacancy
The national overall street rate for non-climate-controlled self-storage units was $128 in November 2022, a 2.0 percent decrease year-over-year, while climate-controlled units averaged $144, a 0.8 percent decrease year-over-year. Although there was a slight decrease, the current rates are considered high for the industry. The slowdown in growth was anticipated, as the rapid gains resulting from the pandemic were not sustainable long-term. Some major metros reported positive rent growth in November including Nashville, Orlando, Los Angeles, Columbus, Dallas-Fort Worth, and Miami.
Vacancy rates are anticipated to increase slightly in 2023 as consumers shift where they spend their money due to inflating costs of everyday goods. The average self-storage occupancy rate is about 92 percent for 2022 and is expected to hold throughout 2023. Self-storage facility owners should expect vacancy rates to remain steady between seven and eight percent in the coming years. Historically, self-storage occupancy rates have been above 90 percent since 2015, which is an excellent sign for owners.
Construction
Within the five-year scope, self-storage construction has increased astronomically. For example, of Yardi Matrix’s 4,536 self-storage properties in progress nationwide, there are 1,721 planned properties, 828 under construction, and 644 prospective properties. In the coming year, construction is anticipated to accelerate in areas with accelerated population growth, like Las Vegas, with 18.8 percent of its existing stock in the construction pipeline. Overall, 2022 saw approximately 1,555 completed self-storage projects, keeping up with high demand. Construction is predicted to moderate in the coming years due to rising construction costs nationwide.
Sales
Self-storage sales in 2022 remained at record highs in line with the exceptional demand in the sector, as approximately one-third of all Americans use self-storage. Although interest rate hikes hindered quarterly performance this year, overall sales were above pre-pandemic levels. Q4 22 saw about 154 self-storage properties traded, which is a 4.6 percent decrease from Q3. At the end of 2022, the mean asking rent is anticipated to land around $1.30 to $1.34 per square foot, reflecting high demand and encouraging owners to ask more for rent.
Texas Self-Storage Market Recap
Texas has 7.74 square feet of self-storage space for every person in the state. Houston has 8.1 square feet of storage space per capita. That’s nearly double that of Los Angeles and Chicago, which have 4.4 and 4.1 square feet per person respectively. But Houston is in line with other major Texas cities, tying Dallas and San Antonio with Austin close behind at 7.9 square feet per capita. In fact, Houston ranks No. 2 nationally for the number of self-storage facilities with an estimated 1,035 in and around Houston.
Texans are offered more square feet of self-storage space to rent than residents of any other highly populated US state. The Lone Star State also has the 2nd highest total square footage of storage space. Texas’s big cities figure very strongly regarding the amount of storage that is available per person, currently taking four out of five positions in the list of the top 5 cities in this regard. Check out our blog on Self-Storage Demand by Months in Texas for more information.
Interested in buying or selling a self storage property in Texas? Visit Lumicre’s Self Storage Sales Group page for Texas self storage brokerage sales advisory.