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Research - NOVEMBER 7, 2019

Self-storage struggling amid high supply levels

by Andrea Zander

New deliveries continue to weigh on street rates in almost all markets of the self-storage sector, reported Yari Matrix. While new ground-up projects are impacting many secondary markets, older and highly regulated markets’ storage inventories are growing through conversions and expansions.

Compared with the previous month, the new-supply pipeline as a percent of existing inventory increased by a slight 0.1 percent. The share of projects in various stages of development accounts for 9.4 percent of total stock.

In Nashville (21 percent of stock), a growing and diversifying economy continues to support strong population gains and household formations, boosting demand for storage space. The metro added more than 23,000 jobs in the 12 months ending in May, with leisure and hospitality leading the way in job gains (6,900 new positions). As of September, there were 17 projects under construction in Nashville, with an additional 16 in the planning stages. While demand drivers are present in the market, significant new supply and high penetration of roughly 8.5 NRSF per capita leave Nashville operators with an uphill battle for street-rate growth.

The expanding West Coast markets of Portland (20.6 percent of stock) and Seattle (18.4 percent) are still seeing elevated construction levels. However, Portland’s pipeline has slightly declined compared with the previous month. Expect the metro’s development pipeline to continue to shrink in the coming quarters as existing projects struggle to lease up and more deliveries hit.

Looking ahead, the self-storage industry is in for a rough slog: Deliveries are expected to remain elevated, pushing down pricing for many operators and increasing the need for improved performance through tightened operating costs and better efficiency.

To read the full report, click here.

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