The self-storage sector is showing early signs of stabilization after its longest stretch of declining rental rates and occupancy in more than a decade. Oversupply and falling rates defined recent years, but industry professionals now see cautious optimism as the market adjusts after its pandemic-era boom.
Pandemic Demand Surge
Demand for self-storage surged in 2020 as millions of Americans reconfigured their homes for remote work. Many created home offices and gyms, driving a wave of new storage rentals.
“COVID was a massive driver of demand for self-storage because people shifted how they live,” says Tom de Jong, Executive Vice President at Colliers International and founding principal of the De Jong Self Storage team.
This demand spike lasted through mid-2022, pushing rental rates and occupancy to record highs. Developers and investors responded by launching new projects at a rapid pace.
Supply and Demand Shift
Projects launched in 2021 and 2022 reached the market in 2023 and 2024, just as pandemic-driven demand faded. At the same time, broader housing market conditions changed.
Higher interest rates slowed home sales, while the return to office work reduced the need for extra storage. Because 40–50% of demand comes from home moves, the slowdown in housing transactions removed a key support for the sector.
Pricing and Valuation Pressure
The market has experienced its longest period of declining rental rates and occupancy in recent memory. “This is the longest period of sustained reductions in rental rates and occupancies that I’m aware of in at least 16 years,” de Jong notes.
New developments have been hit hardest. In Minnesota, a recently completed facility cost about $6 million to build. Current offers are significantly lower. “We offered $4.8 million, and we believe they’ll accept our offer,” de Jong says.
This repricing shows a major shift in buyer underwriting. Earlier projections of 4.5–5% exit cap rates have increased to 5.5–7%, depending on location and asset quality. Buyers now demand higher yields to offset risk and uncertainty.
Regional Market Differences
Oversupply is not uniform across all markets. Sun Belt cities such as Phoenix, Austin, and Las Vegas have seen significant new supply, with some areas adding 10–12% more units in a short period.
“New supply will impact rental rates,” de Jong explains. In these markets, rents have not rebounded after lease-up. For example, rates in North Las Vegas that once reached $1.80 per square foot may now stabilize at $1.20-$1.30 per square foot.
Markets with high barriers to entry, such as Boston, Manhattan, Los Angeles, and the San Francisco Bay Area, remain relatively stable. “Boston is a market that’s doing very well,” de Jong says. Limited new development in these areas helps maintain higher rents and occupancy.
Early Stabilization Signs
Several indicators suggest the market may be nearing a bottom. Publicly traded self-storage REITs have begun to moderate aggressive discounting strategies used to fill units.
“It seems like the industry has come out of this super aggressive rental rate environment a little bit and started raising those lower web rates,” de Jong observes.
Industry sentiment is also improving. At a recent panel, participants reported stronger rental activity and a more stable rate environment heading into the spring 2026 leasing season. While not a full recovery, these trends suggest conditions are improving.
Capital Waiting on Sidelines
Transaction volume has slowed over the past two years due to a gap between buyer and seller expectations. However, significant capital remains available for investment.
“Every week, or at least every few weeks, we read of another institutional fund that wants to get into the space or just committed $600 million, a billion dollars to a sponsor to invest in self-storage,” de Jong notes.
Large transactions still occur for top-tier assets. A recent billion-dollar acquisition in Manhattan shows continued confidence in the market’s strength, and Public Storage’s recent acquisition of NSA REIT for $10.5 billion shows continued confidence in the sector.
As private equity funds approach exit timelines, selling pressure may narrow the pricing gap and increase deal activity in late 2026.
Emerging Financial Stress
Distressed sales have not yet surged, but financial strain is emerging. This is especially true for projects financed with aggressive bridge loans during the boom.
“In some cases, this debt could be at 110–120% of current asset value,” de Jong says.
Recent quiet handbacks suggest the distressed cycle may be starting. These transactions are occurring through private negotiations, keeping them largely out of public view.
Outlook for Investors
Despite recent challenges, the sector’s fundamentals remain strong. Self-storage benefits from a diversified tenant base and steady demand driven by life events such as moving and downsizing.
“There’s a ton of capital on the sidelines looking to acquire,” de Jong says.
For disciplined investors, the next year may offer opportunities not seen in over a decade. As the market absorbs excess supply and distressed assets, long-term investors may find attractive entry points.
About the Expert: Tom de Jong is Executive Vice President at Colliers International and founding principal of the De Jong Self Storage team. He has completed more than $2 billion in self-storage transactions across 32 states over a 16-year career.
