The self storage sector closed on another successful year as investor interest and demand continued to be substantial, only tempering at the approach of the last quarter of 2022, which manifested in softening street rates and declining occupancy. Although street rates have dropped, as they are influenced by the seasonality and the current slowdown in the housing market, the overall outlook remains positive.
In December, the average national street rate for all unit sizes decreased 2.8 percent annually. Despite this drop, average rates continued to be higher than those seen prior to the pandemic. Taking a closer look, rates for standard-size 10×10 units declined 3.4 percent for climate-controlled units, dropping to $142, while rates for the same-sized non-climate-controlled ones at $126, registered a 2.3 percent yearly plunge. Rates for larger units fared better than the smaller ones in the same time period, as the ones for 10×30 units decreased by 2.4 percent, while those for 5×5 units saw a 1-percent higher fall.
Among the top 31 markets tracked by Yardi Matrix, Nashville raised above the rest as the sole market that closed the year with positive annual street rate growth for the 10×10 non-climate-controlled units together with the climate-controlled units. In December, for this singular market, rates increased by 2.8 percent for the 10×10 non-climate-controlled units and by 3.7 percent for the climate-controlled units of the same size.
Looking at month-over-month changes, the trend of decelerating street rents persisted as average street rates registered a $2-fall compared to their November values. In broad terms, the December decline was widespread as 30 of the top 31 metros witnessed a dip. The only metro that rebuked this trend was Pittsburgh, where street rates for the 10×10 units remained flat. Meanwhile the largest monthly losses were in Orlando, Miami and the San Francisco showing a $4-drop month-over-month for the 10×10 non-climate-controlled and climate-controlled units combined.
READ ALSO: Are Historical Highs Behind for the Self Storage Sector?
In December, there were 4,627 self storage properties in different stages of development. The properties under construction made up 3.6 percent of the total inventory and this portion of the new supply pipeline remained unchanged month-over-month. Another component of the pipeline encompassing the planned developments accounted for 7.8 percent of the nation’s overall stock. As rising development costs as well as scarcer capital and higher interest rates continue to pose a problem, those self storage projects that are in the planning stages will most likely take longer to finish, crystalizing in the number of properties under construction gradually declining leading to a slowdown of deliveries through 2023 and early 2024.
Drilling down to a market level, Orlando had the greatest development pipeline encompassing projects under construction, even with the abundant 8.8 net square feet of storage space available per capita. The metro’s pipeline represented 6.9 percent of its the total inventory, marking a 30-basis-point increase month-over-month.
Head over to Yardi Matrix to read the full report.
