Self-Storage Sector Holds Up Amid the Pandemic
October 26, 2020
A confluence of factors conspired to drive down rents at self-storage properties earlier in the year, but now with new demand generated by the broader disruptions caused by the COVID-19 pandemic, the sector’s fortunes have stabilized.Read the Full Article
Though the majority of properties were still close to fully occupied, over-eager developers had squeezed too many new projects into growing cities like Phoenix and Orlando, Fla., which put some downward pressure on rents. Then the initial chaos caused by the pandemic rents down further.
Since then, the pandemic has frightened at least a few developers into delaying self-storage developments—or scrapping planned projects entirely. That has reduced the competition. In addition, after the lockdowns were lifted, pent-up demand helped fill empty units.
“This has probably been our best-case scenario for storage, considering the possibilities we considered in the spring of this year,” says Nick Walker, executive vice president of capital markets, self storage, for CBRE, working in the firm's Los Angeles office.
At the end of the second quarter 2020, 92.2 percent of self-storage space was occupied across the U.S., according to data from Marcus & Millichap. That’s a few percentage points higher than what is typical for the sector. “Now we are beginning to see people push rents,” Walker says.
The occupancy rate is even higher than that in the most competitive markets.
“We are now seeing markets well above that, especially growth markets like Houston and Seattle,” says Steven Weinstock, first vice president and national director of the national land group and national self-storage group in Marcus & Millichap’s Chicago Oak Brook office.