ncertainty regarding the direction and magnitude of investment returns is causing a flight to quality with a direct route to self-storage. Uncertainty in macro-economic conditions generally causes a loss of confidence in investments. As a result, caution has led to an increase in self-storage investment rates in the First Quarter 2025 Investor Survey. For example, the survey results show an increase of 7 basis points or an overall cap rate average of 5.73 percent, indicating a change in direction after several quarters of declines. Market participants expressed confidence in the self-storage sector, given the long history of stable performance.
The self-storage team at Newmark Valuation & Advisory surveyed over 50 market participants about a wide variety of data points, including the usual cap rate, terminal cap rate, and yield rates. Key performance indicators are shown in the Segmentation by Investment Quality 1Q 2025 table.
See Segmentation by Investment Quality 1Q 2025.
Among other short-term investment concerns, the 10-Year Treasury dipped below 4 percent, a leading indicator of recession. At the same time, inflationary concerns remain. Some investors noted that even if a period of stagflation is reached (recession with inflation), self-storage is recession resistant and existing customer rate increases are a hedge against inflation.
With dynamic change in macro-economic conditions, there is uncertainty regarding the future leading to low confidence in investment markets in general. Self-storage continues to be viewed as a safe and stable investment but with slightly elevated return expectations.