By Mike Gordon

ew real estate sectors have experienced a more remarkable evolution than self-storage. Once viewed as a peripheral niche, we have seen the sector become a strategic priority for many of the most sophisticated real estate investors. That growth did not happen overnight. It came from a deeper appreciation of storage’s core demand drivers and the compelling characteristics that make it both defensive and operationally complex.

When we first began investing in the asset class in 2005, our conviction was immediate: defensive needs-based demand, fragmented ownership, and operational complexity that rewarded experience and scale. Two decades later, we believe those foundational truths remain as relevant as ever, but the thesis has matured. After more than 330 investments and partnerships with 15 operating companies, we have developed a multi-decade base of experience, encompassing real data on micro-market behavior, supply cycles, and operator performance across varied market conditions.

Throughout this time, we have observed continued demand for storage solutions supporting individuals and businesses through both predictable and unpredictable moments of life. Yet, as this demand remains steady, the depth of institutional understanding has evolved, showcasing the potential opportunities that lie ahead.

Looking back across two decades in self-storage, we have seen several long-term trends stand out. First, households have steadily increased their consumption of household items, even as average home sizes have started to decline. This dynamic has been a continuing contributor to off-site storage demand.

Second, renters have accounted for more than 60 percent of household moves since 2012, and renters typically move more frequently than homeowners. As a result, many customers now treat storage as an extension of their living space, particularly those navigating frequent relocations or living within smaller urban footprints.

Third, approximately 20 percent of self-storage demand comes from business and commercial users. This segment has shown itself to be stable across economic cycles. The remaining 80 percent comes from households, which we broadly categorize as long-term users, life-event users, and those managing temporary transitions such as moves, renovations, or downsizing.

Across economic environments, we believe the data tells a clear story: The durability of storage comes from a diversity of demand. It is largely powered by human behavior, not a single economic variable. While economic cycles fluctuate, life events (forming households, relocating, downsizing, managing estates, etc.) remain steady over time, demonstrating the durability of the sector’s long-term performance.

Beyond our own firm-level experience, public and private market performance reinforces the sector’s appeal. NAREIT data shows that storage REITs have delivered mid- to high-teen annual total returns over the past two decades, outperforming the broader REIT universe. On the private side, NCREIF data shows self-storage among the higher-performing property types since it entered the index in 2005, including periods where returns exceeded the overall index average.

In 2024, NCREIF formally introduced self-storage as its own property type within the NFI-ODCE index and expanded guidelines, allowing core strategies to hold larger allocations to alternative sectors. Storage has grown from a negligible allocation to roughly 4 percent of ODCE market value, with several large core strategies targeting meaningfully higher exposure. The rationale is straightforward: Self-storage combines fragmented ownership, operational complexity, pricing flexibility, and durable, life-event-driven demand.

Over a 20 year period, index data has shown that self-storage has demonstrated stronger performance relative to other real estate property types in both public and private markets. As a result, we have seen that institutional investors are continuing to increase their focus and allocation to storage.

While interest in self-storage is national, we have observed that demand tends to be more pronounced in markets where population growth, density, income levels, and migration trends reinforce long-term need. Large metropolitan areas where residents move frequently and tend to live in smaller spaces have historically exhibited these characteristics.

Historically, markets such as New York, Los Angeles, San Francisco, Boston, and Chicago have reflected these dynamics. More recently, however, high-growth Sun Belt metros have also attracted increased industry attention.

Our firm has been actively capitalizing on this trend, recently acquiring a 21-property, 1.3-million-square-foot self-storage portfolio through a joint venture with Morningstar Properties. The portfolio spans high-growth markets across Texas, the Carolinas, Florida, Georgia, Virginia, and Arkansas, reflecting continued conviction in regions with strong population and employment trends.

Core coastal markets and Sun Belt metropolitan areas are primarily assessed through the lens of key market drivers, including demographic trends, shifting housing patterns, and the scale of the new supply pipeline.

Over the past few years, even when broader economic indicators were mixed, self-storage continued to demonstrate consistent demand. Even as home mobility hit a 30-year low and the sector digested the largest supply wave in over a decade, market observations show that performance held steady. We believe that its resilience was not accidental. It is structural.

As we look toward 2026, we believe several dynamics will support the sector:

• Tenant length of stay continues to increase. Nearly half of customers now remain in storage for more than 12 months, supporting revenue stability and pricing power.
• Generational demand is accelerating. Millennials and Gen Z use self-storage at higher rates than prior generations, driven by mobility, urban living, and lifestyle flexibility.
• Commercial usage remains steady at approximately 20 percent. This demand provides downside mitigation during housing market slowdowns.
• New supply is declining meaningfully. Deliveries in 2026 are projected to be the lowest since 2014—less than half the trailing seven-year average.

We believe one of the sector’s defining characteristics is the asynchronous nature of its demand drivers. When one source of demand softens, another often strengthens. That diversity acts as a built-in shock absorber. Combined with a shrinking development pipeline, the setup remains significant for disciplined investors and experienced operators.

We expect 2026 to be an active year for the industry. We have seen that storage fundraising accelerated materially in the second half of 2025 as investors positioned capital for improving fundamentals. At the same time, development starts have declined sharply due to higher construction costs, tighter financing conditions, and more conservative underwriting. As a result, supply growth in 2026 and 2027 is projected to remain below 2 percent annually—the lowest level since 2014.

With interest rate volatility moderating and liquidity improving, sectors that have historically exhibited defensive characteristics and operating leverage often become early beneficiaries. Self-storage continues to feature high operating margins, stable expense structures, and predictable customer retention. For these reasons, we believe the sector will likely remain a priority allocation in the years ahead.

As investors increasingly seek assets with predictable cash flow, inflation resilience, and low correlation to traditional economic cycles, self-storage is expected to continue its evolution from a niche allocation to a core component of institutional portfolios. We look forward to continuing to build alongside our experienced operating partners and contributing to the long-term strength and maturation of the self-storage sector.