SELF STORAGE STREET RATES RACING TO THE BOTTOM
Published on Friday, April 26, 2024
But Orlando and Tampa are two bright spots.
Self-storage operations are facing challenges today, including unclear pricing, difficulty obtaining financing and a “race to the bottom” on street rates, particularly among the public companies, according to a new report from Yardi.
Street rate growth also continued to be negative year-over-year in all top metros.
The average annualized same store asking rent per square foot dropped by 4.5% and by 3.8% since last month. REITs have pushed rates down twice as much as their non-REIT competitors to attract new customers.
“Smaller operators are also being forced to lower their rates to avoid occupancy declines but are later to the game,” according to Yardi Matrix.
Same-store street rate growth for all REITs was -6.6% year-over-year, nearly double the decrease of 3.6% for all non REIT-owned properties in the same markets, it reported.
“Through Q4, REITs have been able to keep achieved rates flat by pushing existing customer rates more frequently and more aggressively,” according to the report.
This is Supposed to be ‘Busy Season’
Streets rates tend to rise at this time of the year amid the busier leasing season. Consider that since 2017, same-store combined rates nationwide have always had at least some positive growth between February and March, Yardi Matrix said, but March’s rate performance “dampens the hope of previous months that street rates were nearing a bottom.”
A lack of transparency into in-place rates has created uncertainty in the acquisition-and-development climate, Yardi Matrix reported. “Yet developers are moving forward with projects, according to Yardi ’s supply data on both recent deliveries and projects under construction,” it said.
There are signs that developer interest in construction is steady.
Space under construction as a percent of existing inventory remained unchanged through the end of March at 3.7%, the report said, and approximately two-thirds of the top metros saw their construction pipelines increase or remain unchanged month-over-month in March.
Orlando and Tampa are two bright spots. In Orlando, supply as a percent of inventory is 2% higher than the next highest metro. Tampa is performing well, too.
Construction activity increased the most in Portland, up 50 basis points month-over-month. However, Yardi Matrix said the new-supply pipeline remains relatively small and new-supply deliveries there have been low, equal to 0.4% of starting inventory.
Street rate growth also continued to be negative year-over-year in all top metros.
The average annualized same store asking rent per square foot dropped by 4.5% and by 3.8% since last month. REITs have pushed rates down twice as much as their non-REIT competitors to attract new customers.
“Smaller operators are also being forced to lower their rates to avoid occupancy declines but are later to the game,” according to Yardi Matrix.
Same-store street rate growth for all REITs was -6.6% year-over-year, nearly double the decrease of 3.6% for all non REIT-owned properties in the same markets, it reported.
“Through Q4, REITs have been able to keep achieved rates flat by pushing existing customer rates more frequently and more aggressively,” according to the report.
This is Supposed to be ‘Busy Season’
Streets rates tend to rise at this time of the year amid the busier leasing season. Consider that since 2017, same-store combined rates nationwide have always had at least some positive growth between February and March, Yardi Matrix said, but March’s rate performance “dampens the hope of previous months that street rates were nearing a bottom.”
A lack of transparency into in-place rates has created uncertainty in the acquisition-and-development climate, Yardi Matrix reported. “Yet developers are moving forward with projects, according to Yardi ’s supply data on both recent deliveries and projects under construction,” it said.
There are signs that developer interest in construction is steady.
Space under construction as a percent of existing inventory remained unchanged through the end of March at 3.7%, the report said, and approximately two-thirds of the top metros saw their construction pipelines increase or remain unchanged month-over-month in March.
Orlando and Tampa are two bright spots. In Orlando, supply as a percent of inventory is 2% higher than the next highest metro. Tampa is performing well, too.
Construction activity increased the most in Portland, up 50 basis points month-over-month. However, Yardi Matrix said the new-supply pipeline remains relatively small and new-supply deliveries there have been low, equal to 0.4% of starting inventory.