10x10Reg Rates 22-23

Analyzing the Decline in Self-Storage Rates and Implications for Investors

The self-storage industry has experienced a noteworthy decline in rates, impacting both customers and investors. As rates continue to decrease, self-storage investors must understand the underlying factors behind this trend and evaluate its implications for their investment portfolios.

  1. Increased Market Competition: The self-storage market has become increasingly competitive, with more facilities entering the industry. This increase in supply leads to a greater supply of available storage units, which, in turn, puts downward pressure on rates as facilities strive to attract and retain customers.
  2. Oversupply of Storage Units: In certain regions, rapid expansion and overdevelopment have led to an oversupply of self-storage units. When the supply surpasses demand, facilities are compelled to reduce rates to maintain occupancy levels and fill vacancies. This oversupply scenario has contributed significantly to the decline in self-storage rates.
  3. Shifting Consumer Preferences: Changing consumer preferences play a crucial role in the decline of self-storage rates. As alternative storage options, such as peer-to-peer sharing platforms or on-demand storage, gain popularity, traditional self-storage facilities face increased competition. This prompts facilities to adjust their rates to remain competitive and attract customers.

    Shown here is a comparison of average rates for 10×10 non climate-controlled units nationwide (2022 vs. 2023)

The decline in self-storage rates carries important implications for investors in the industry
  1. Lower Rental Income: A decrease in rates directly affects the rental income generated by self-storage facilities. Investors may experience a decline in cash flow, which can impact their profitability and return on investment.
  2. Potential Reduction in Property Value: Lower rates may also impact the overall value of self-storage properties. When rates decrease, the potential selling price of a facility may be affected, potentially resulting in reduced returns on investment if the property is sold.
  3. Competing for Occupancy: With the increased competition and declining rates, self-storage investors may face challenges in attracting and maintaining a high occupancy rate for their facilities. Effective marketing strategies, enhanced customer service, and facility upgrades may be necessary to stay competitive in the market.
Adapting to the Changing Landscape

To navigate the evolving self-storage market, investors can consider the following strategies:

  1. Market Research and Analysis: Stay informed about local market conditions, including supply and demand dynamics, rental rates, and competitor analysis. This information will help investors make informed decisions regarding pricing and property acquisitions.
  2. Focus on Operational Efficiency: Enhance operational efficiency to mitigate the impact of declining rates. Implement cost-saving measures, optimize facility management systems, and explore opportunities to reduce overhead expenses.
  3. Diversification and Niche Markets: Consider diversifying investment portfolios by targeting niche markets or specialized self-storage segments, such as climate-controlled units or RV and boat storage. These segments may offer opportunities for higher rental rates and reduced competition.
  4. Customer Retention Strategies: Implement effective customer retention strategies to maintain a high occupancy rate. Providing exceptional customer service, investing in facility maintenance and security, and offering attractive incentives to existing tenants can help retain long-term customers.

The decline in self-storage rates presents both challenges and opportunities for self-storage investors. Understanding the factors driving this trend and adapting strategies accordingly is crucial. While lower rates may impact rental income and property values, investors can leverage market research, operational efficiency, diversification, and customer retention strategies to navigate the changing landscape and maximize their returns in the self-storage industry.

Market Research and Analysis for Self-Storage Investors

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