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Research - SEPTEMBER 13, 2019

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Self-storage: Investors see past supply as hurdles to strong demand

by Andrea Zander

The self-storage con­struction pipeline has begun to contract following seven years of expan­sion, although numerous deliveries are still under way, reported Marcus & Millichap’s second half 2019 report.

Several markets, including Raleigh, N.C., and Denver, have seen their inventories grow in excess of 40 percent so far this cycle. The added supply has placed downward pressure on asking rents, with more operators offering concessions to lease units and maintain occupancy levels. In other metros, such as Min­neapolis-St. Paul and Phoenix, building is ramping up substantially in 2019, creating potential headwinds for the future. Many smaller second­ary and tertiary markets are also expanding inventories at a faster pace this year. Overall building activity is moderating though, influenced by rising construction costs and tighter lending. In some cases, developers are reducing expenses by converting other types of vacant property.

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