Recently I had the pleasure of moderating a panel of some of the top players within the self-storage space nationally, from REITs to small operators, developers, a general contractor and several lenders.
To start 2025 the operators commented that tenants have become stickier – allowing the implementation of multiple rounds of ECRI’s (Existing Customer Rate Increases), helping increase overall portfolio incomes. While the early leasing season is showing promise it still lags well behind the peak years of 2021-2022 and is slightly below the pre-COVID years but markedly improved over the past 2 years. The drop-off in new supply additions in many markets has been a big boost to overall store performance. High barrier-to-entry markets are, on average, performing above lower barrier markets given the lag in adding new supply.
Our small market operator manages dozens of smaller facilities in smaller markets (Tupelo, Tulsa and other smaller markets) and is experiencing noticeable improvements in leasing volume over the past two winters. They have managed to grow occupancy and rental rates so far in 2025 and are optimistic that the worst of this cycle is behind them.
On the development front, there are still lots of headwinds making the process of building new facilities ever more challenging. Not only are overall project costs higher but the challenges with access to capital have forced a shift in the profile of groups that are moving forward with new development. First-time developers, groups with limited experience or those with a marginal balance sheet are having significantly more difficulties accessing capital to move forward. Additionally, many of the most obvious sites, or those sites with an easier path to approvals have been cherry-picked, making site selection ever more challenging. On the positive side, there are several software providers that make the process considerably less time arduous (ie PropRise, Radius, TractIQ, Yardi, StorTrack and more).
On the lending side, we have seen an influx of bridge debt from the REITs and other private lenders, multiple non-bank lenders and other private capital sources becoming much more active. While the banks, credit unions and insurance companies are still lending their focus has been on net worth and liquidity, while the bridge programs are more focused on operating metrics and sponsor experience. Rental rates in a sub-market are the primary indicator of future success with drivers of increasing rental rates including population growth and density, and household income levels.
The investment sales market has been soft for the past 24 months but appears to be gaining significant momentum. There is absolutely a LOT of pent-up demand to sell and the consolidation within the industry will continue as more capital has come into the industry. From a CAP rate perspective we have seen very aggressive valuations in core markets, slightly less aggressive values in secondary markets and rural markets have lagged behind, primarily due to the current lending environment and interest rates. There is lots of optimism that the investment sales market will accelerate into the second half of 2025 and beyond!
For all things self-storage related, or to find out what your assets may be worth today, connect with Tom de Jong or any of the de Jong I Becher Self-Storage Team within Colliers.
Tom de Jong is Executive Vice President with Colliers International and a Principal of the de Jong I Becher Self Storage Team and can be reached at (215) 260-1712 or tom.dejong@colliers.com
