Section 3 • Self-Storage Supply Forecast
T

he Q1 2024 self-storage supply forecast update has increased forecast deliveries for 2024 and 2025. For the later years, the forecast has been reduced. See Table 3.1 at the right.

Table 3.1 - Self Storage New Supply Forecast Q1 2024 vs. Q2 2023
Near-Term Forecast: 2024 And 2025
Both construction starts and the under-construction pipeline increased to close out 2023. As a result, the near-term forecast has been increased by 10.9 percent and 12.5 percent for 2024 and 2025, respectively.
For markets opened on or before 2020, there are currently 60.1 million net rentable square feet (NRSF) under construction. This represents an 8.3 percent increase quarter-over-quarter and an 11.3 percent increase year-over-year. Self-storage construction completion times appear to be moderating. The year-end growth in the under-construction pipeline was primarily driven by increased new development. See Chart 3.1. below.
Chart 3.1 - Self Storage Under-Construction Pipeline
Chart 3.2 - Self Storage Construction Starts (Trailing Four-Quarter Average)
Chart 3.3 - Days in Construction (Trailing Four-Quarter Average)
For 2021 and 2022, construction starts averaged a little more than 11.0 million NRSF per quarter. In Q1 and Q2, starts increased to more than 13.5 million NRSF, and for Q3 2023, 16.1 million NRSF have been identified by Yardi Matrix. The expansion in the under-construction pipeline was most likely driven by an increase in construction starts in the second half of 2023. See Chart 3.2 below.

Days in construction continues to moderate, albeit at levels well above long-term averages. To date, Yardi’s database has identified 124 properties completed in Q4 2023, on average in 383 days. This is slightly above Q3 2023’s 372 average days in construction, but still below the trailing four-quarter average of 395 days. See Chart 3.3 on page 28.

Chart 3.2 - Self Storage Construction Starts (Trailing Four-Quarter Average)
Chart 3.3 - Days in Construction (Trailing Four-Quarter Average)
Long-Term Forecast: 2026 To 2029
Compared to the previous quarter, the Q1 2024 update has reduced forecast completions for the years 2026 through 2029. In general, Yardi’s now forecasting new-supply growth to be around 2.0 percent of stock for 2026 and 2027 and 1.5 percent of stock for 2028 and 2029. For 2028, this results in a 38.7 percent reduction in new supply compared to the previous quarter’s forecast. Self-storage has matured into an institutional-quality asset in the 15 years since the 2008 financial crisis. Increasing levels of self-storage utilization drove NOI growth, which in turn attracted investment interest and new development. At a national level, self-storage new supply has exceeded 2.5 percent of stock annually since 2015. Yardi’s previous forecasts had therefore modeled long-term new-supply growth at approximately 2.5 percent of stock. Yardi remains optimistic about self-storage’s long-term prospects, but no longer feel this level of long-term growth is appropriate. In the second half of 2023, the number of abandoned and deferred projects in Yardi’s database noticeably increased, while growth in both the planned and prospective pipelines stalled. The year-over-year change in street rates was negative in 2023. As a result, completions for the later years of Yardi’s forecast have been reduced to around 38.0 million NRSF in 2026 and 2027, and further reduced to around 29.0 million NRSF in 2028 and 2029.
The number of abandoned storage properties increased throughout 2023. On average, eight properties per month entered abandoned status during the latter half of 2022; in November 2023, 44 properties entered abandoned status.
After a slight decline in Q3 2023, the planned pipeline expanded by 1.43 percent in Q4 2023 to 114.0 million NRSF. This represents a 2.08 percent increase over Q2 levels and an 11.22 percent year-over-year increase. See Chart 3.4 below left.
Chart 3.4 - Self Storage Planned Pipeline
Chart 3.5 - Days in Planned
Days in planned remains elevated but has fallen off the high point achieved in mid-2023. Days in planned increased from 399 in Q2 2022 to 628 in Q2 2023. However, days in planned has decreased in the past two quarters, ending at 523 days in Q4 2023, below the trailing four-quarter average of 553 days. See Chart 3.5 below left.

After increasing noticeably in late 2022, the prospective pipeline has been flat for most of 2023. Currently, there are 44.8 million NRSF in the prospective pipeline, a 1.0 percent increase quarter-over-quarter and a 2.06 percent increase year over year. See Chart 3.6 on the opposite page.

Since mid-year 2023, the number of properties with a deferred status has increased substantially. Currently, 78 properties totaling 4.39 million NRSF are categorized as deferred, a 29.6 percent increase quarter over quarter and a 44.5 percent increase year over year. See Chart 3.7 on the opposite page.

The number of abandoned storage properties increased throughout 2023. On average, eight properties per month entered abandoned status during the latter half of 2022; in November 2023, 44 properties entered abandoned status. For full year 2023, 245 properties have been categorized as abandoned, a 104.2 percent increase over the level recorded in 2022. See Chart 3.8 below right.

Chart 3.6 - Self Storage Prospective Pipeline
Chart 3.7 - Deferred Storage Properties
Bottom Line
New self-storage construction activity surprised to the upside at the end of 2023. Despite expectations for a slowdown, both construction starts and the under-construction pipeline expanded. Yardi’s near-term supply forecast was therefore increased for both 2024 and 2025 compared to last quarter’s update. For the longer term, the Yardi Matrix self-storage supply forecast has been materially decreased.
New self-storage construction activity surprised to the upside at the end of 2023. Despite expectations for a slowdown, both construction starts and the under-construction pipeline expanded.
Chart 3.8 - Abandoned Storage Properties
Negative street-rate rental growth and tight financial conditions combined with a sharp increase in the number of abandoned and deferred projects and flat planned and prospective pipelines suggests development enthusiasm for self-storage properties has noticeably declined. As a result, Yardi’s expectation for long-term new-supply growth to stabilize at around 2.5 percent of stock has been materially decreased to roughly 2.0 percent of stock for 2025 and 2026, and further reduced to 1.5 percent of stock for 2028 and 2029. As always, Yardi Matrix is extremely focused on accurately maintaining its development pipeline data and identifying any changes in self-storage development activity.
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