End of Year Market Report 2022
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.
- The global self-storage market is anticipated to reach a value of $71.37 billion by 2027
- 7M square feet of storage space has been built over the last five years; an amount that is equivalent to 15.7 percent of total inventory
- Street rates are more than 10 percent higher than pre-pandemic levels
- There are 4,536 total self-storage properties in development, including prospective projects
- The national construction pipeline accounts for 11.1 percent of the current 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.
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.
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.
Boat & RV Storage
In 2022, the average sale price for a boat and RV storage facility was $624,000, a large jump from 2021’s record level of $447,000, according to YardiMatrix. The onset of COVID-19 prompted many consumers to travel and take up recreational activities. As a result, the sale of RVs and boats reached record highs, leading to the need to store these vehicles skyrocketing, especially because many neighborhoods forbid boats and RVs to be parked in driveways in front of homes or on the street for extended periods.
In the new age of convenience is king, self-storage operators and developers will need to focus on integrating technology into the customer service experience. Touchless technology and online rental systems are the future, and for facilities to keep up with consumer demand, they will need to invest in the right tools and platforms. Additional features that come with online services include inventory tracking, lead capturing, support chat, etc. All of which can improve the overall business operational efficiency for owners.
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 rent 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.