Planned self-storage construction projects, after seeing a steady increase during the last two years, may soon see a slow leveling off, says a major industry analyst.
Throughout both 2021 and 2022, reports the Scottsdale-based commercial real estate data and research firm Yardi Matrix, work began on a little more than 11 million square feet of self-storage rentable space per quarter nationally.
The ever upward trendline hit 16.1 million net rentable square feet by the third quarter of last year.
But now, says Yardi Matrix in its new Self Storage Supply Forecast Notes, while numbers in the near term appear strong, the long term picture may be less vibrant.
In fact, says the report, “in the second half of 2023 the number of abandoned deferred projects in our database has notably increased,” adding that “growth in both the planned and prospective pipeline has stalled and the year-over-year change in street rates was negative in 2023.”
Between October and December of last year, the report continues, the number of deferred projects had increased by 44.5% on an annual basis, while the number of abandoned storage properties was up a significant 104.2% compared with the year previous.
The industry has been buffeted by a number of unanticipated crosscurrents: the Covid 19 outbreak in 2020 was initially anticipated as a downer in the market, but instead ended up being a boon as increased numbers of people moved from one place to another, or simply needed to free up space in their homes in order to work remotely.
At the same time, notes the Multi-Housing News, “supply chain disruptions and increased construction costs fueled by inflation,” have presented themselves as unanticipated challenges to getting new projects completed.
Despite these wild ups and downs, the industry has seen more than its share of strong numbers as of the end of last year, with just over 5,000 self-storage projects in various stages of development nationally, and a new supply pipeline that included 1,890 planned projects.
The bottom line for the foreseeable future, says the Yardi Matrix report, is for “long term new supply growth” to decrease to roughly 2% of stock for 2025 and 2026, and a further decline to 1.5% of stock in 2028.
By Garry Boulard
