he past five years have been interesting in the world of real estate. In March 2020, the Federal reserve cut interest rates to historic lows. As a result, it seemed like everyone was buying properties left and right, and the self-storage industry was no exception. Yet, once those interest rates rose in 2024, things started to stall. Buyers and developers pushed the pause button while the price of everything became more expensive.

Then, in September 2025 the Federal Reserve cut rates once again by 0.25 percent for the first time all year. While it’s a movement in the right direction, it’s also anticlimactic since that minute decrease is not exactly something to write home about.

Nevertheless, there is some optimism that the needle will keep moving, especially since economists are predicting additional decreases. And since the self-storage industry has been called a “cash cow” for several years, these rumors beg the question: How have the recent cuts and the potential ones in the horizon affected this space?

“The rate cuts have been widely forecasted,” says Shawn Hill, principal and co-founder of The BSC Group, a commercial mortgage brokerage and financial advisory firm. “So, to some extent, they had already been priced into the market prior to it actually happening in terms of the base indices that lenders price deals over. But yes, the lower rates are attractive to borrowers, and they can have a tremendous impact on the economics of a transaction, so they have had and will continue to have a positive impact on real estate lending.”

Hill adds that if we look at the CMBS market as a proxy, lending activity throughout 2025 has been robust. “YTD in the CMBS market alone, lending volume has exceeded $90 billion across 90 different issuance transactions, with over $9 billion in the month of September alone. Historically speaking, this is a significant volume.”

However, that optimism isn’t held by everyone. “Unfortunately, it’s the big no news,” says Chris Sonne, specialty practice co-lender at Newmark, a consulting firm that assists investors in every stage of self-storage development. “The markets have been expecting it, and the change was not significant enough to really change the needle for folks on interest rates on loans.”

Sonne explains that while it hasn’t changed the market dynamically, everyone loves the direction rates are going. “Market sentiment is that they expect at least 25 to 50 additional basis points. If we get another 25, it might have some impact on cap rates. But cap rates didn’t change that much when interest rates went up, so they will have to go down quite a bit to really change that.”

Neal Gussis, executive director of capital markets at SPMI Capital, agrees. When asked whether he’s seen an increased demand for loan advisory services due to the lower rates, he answers in the negative. However, he is having increased demand with owners having upcoming maturities.

“The rates haven’t gone down that much, just 25 basis points,” says Gussis. “It’s not enough for borrowers to want to borrow more money. We have seen the five- and 10-year treasury come down a bit as well, not necessarily because the Fed rate came down but because of other economic factors.”

Gussis mentions the weakening in job numbers as a big contributor. He also points out that from July of 2022 to the beginning of 2025, there was an inverted yield curve (the difference between a two-year treasury and a 30-year treasury). “In typical times, the rates for 10-year treasury loans are higher because there’s more risk. Yet, for almost two and a half years, you could get long-term money for cheaper than shorter-term loans. A lot of people were fixating on five- or 10-year loans at 3, 3.25, 4, 4.25 percent fixed. If they took a shorter-term loan, it would’ve been more expensive.”

Gussis contrasts such scenario with where things are now. “We’re in a period where inflation as tracked by the U.S. Consumer Price Index (CPI) is fluctuating in the 2.5 percent to 3.0 percent range, which is a more normal range. There’s a reason for the shorter-term treasuries to be lower than they were two years ago, when we were looking at 9 percent annual inflation.”

Regardless of where a pundit may stand on this topic, it behooves everyone to stay tuned to the Federal Reserve’s next move. Many policymakers have signaled two additional rate cuts in 2025. This has already impacted the S&P 500, especially with the circulating rumors that there may be five additional cuts during the last quarter of the year and as we enter 2026.

“I don’t think they are rumors,” says Hill. “The current administration has made it very clear that they want rates lowered; and while the independent Fed has not fully cooperated, they have clearly gotten the message.” He adds that unless something changes dramatically in how the economy is trending, the market fully expects there will be additional rate cuts well into the first half of next year.

Sonne echoes that sentiment. “I think there’s a lot of momentum for the year ahead,” he says. “Those tend to drive decisionmakers in a good direction. We’ll see more transaction volume, deals done, more deals built than we have seen in the last three years, so I’m looking ahead to a more robust and healthy self-storage environment. Not that things have been bad, either. They’ve been OK, but storage can’t always be fantastic. It’s been good, but it can’t always be great. We’re looking forward to better years ahead.”

Hill believes that the biggest risk is related to the development market. “Lower rates make development more affordable and compelling. However, excessive new supply can have a negative impact on market fundamentals like rent and occupancy, which is something we are finally working our way out of from the last cycle.” He notes that while lower rates may rescue some deals that were experiencing stress, it could likely cause history to repeat itself.

Aaron Swerdlin, vice chairman of real estate advisory firm Newmark Group, Inc., also recommends caution. “During the pandemic frenzy, we saw a real focus on the Sun Belt and all the markets with net in-migration,” he says. “Those, coincidentally, were the markets that saw new supply and development ramp up quickly, and those markets are now challenged because they are dealing with oversupply. The owners don’t have much pricing power, and tenants are getting deeper move-in discounts. I think that, overall, it’s more institutionally minded capital. They focus on density and areas where new supply is increasingly difficult. Rents typically in those areas are higher; operating margins are better. We see a draw to those dense markets.”

To avoid costly misjudgments, Swerdlin advises borrowers to do their due diligence. “The biggest mistake is debt making or breaking a deal. If a deal makes sense only because of the debt, in an environment where the market changes quickly, you can get trapped. If you’re over leveraged and you’re only making money when the interest rates are low, it’ll be difficult to refinance when the market is like what we have right now. If you were making all the money from low interest rates, when they go up, it’ll be a challenge.”