Fewer new stores are coming, but that alone won't lift your street rates. The supply cut helps most where nothing new is opening near you, so check your trade area before you plan around it.
What happened
Marcus & Millichap released a construction outlook last Thursday. Its headline for storage is that construction investment is 32% below its 2023 peak, per Modern Storage Media's write-up.
The report's reasons are financing costs, material prices and labor constraints. Together they make new projects hard to justify. Its read is that vacancies could keep falling and rents could keep rising for longer while the existing supply fills, as the same summary describes it.
It also tells investors to weigh future supply against demand, because development cycles differ by property type and by market.
Two limits on the number. It measures dollars invested, not units or NRSF. And the summary gives no as-of date for it. We worked from the summary, not the full report.
What it means for your facility
The dollar figure is easy to misread, so here's the arithmetic. These are our assumptions, not the report's data.
Say a market saw $100 million of storage construction at the 2023 peak. Down 32%, it's now $68 million. If material and labor costs are higher than in 2023, that $68 million buys fewer NRSF than the same dollars did then. That part is our inference, and the real unit count could differ.
Now put a price on timing. Take a 50,000 NRSF facility at 90% occupancy, which is 45,000 occupied NRSF. At $1.20 a foot a month, each 1% you add to achieved rent is $540 a month, or $6,480 a year.
A forecast of rising rents is the report's view, not a measured number. Our look at Yardi's latest rate data shows rates still moving the other way, so a smaller pipeline hasn't fixed pricing yet. Stores that opened earlier may still have units to fill.
Our read: a national supply cut is a reason to stop discounting by reflex, not a reason to raise everywhere. Where no store is under construction within your trade area, you have the strongest case to hold rates. Where one is, the national number doesn't protect you. We walked through that in our trade area pipeline post.
The same supply picture matters if you plan to sell or refinance. A second Modern Storage Media piece says buyers want a local supply pipeline in the marketing package, and that rising construction costs and tighter zoning make existing, well-located facilities more valuable. That article is a general guide, and the text we had was cut off, so check its details before you quote it.
What to check this week
- List every facility you run and the nearest storage under construction or permitted for each. Use county and city planning records.
- Mark each project as broken ground or permitted only. Financing and cost pressure can stall the second kind.
- Sort your facilities into two groups: no new supply within the trade area, and new supply opening. Test a street rate increase in the first group and watch move-ins before you roll it out.
- In the second group, track the new store's first-month specials weekly and hold off on cuts until you see your own move-ins move. The break-even math on a rate cut shows what a cut has to win back.
- Add a one-page supply summary to each facility's file. You'll want it for a refinance or a sale.
If you'd like your street rates, Map Pack position and move-ins tracked together market by market, that's what our self-storage marketing service covers.