By R. Christian Sonne

he 1Q 2026 Investor Survey shows an increase in investment rates with an average overall capitalization rate of 5.66 percent. This reflects one of the largest quarter increases of 14 bps but remains near the average of the last three years. Similarly, exit or terminal cap rates increased to 6.07 percent and the internal rate of return or discount rate increased to 7.74 percent.

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 2026 table.

See Segmentation by Investment Quality – 1Q 2026 table.

The average cap rate one year ago was 5.61 percent, showing a slow, downward trend ending in 4Q 2025 with a cap rate of 5.52 percent. This quarter, investors cited market uncertainty as the primary reason for investment rate increases attributed to macro-economic concerns due to the war with Iran and inflation. Market sentiment has been highly elastic, particularly in the last month of the first quarter. There remains sector optimism for operational improvement beyond seasonality in the next two quarters after a 12-quarter period of slow growth.

Investor interest in the sector remains high, best evidenced by the PSA $10.5 billion acquisition of NSA. It is another indicator of the steady and resilient characteristics of self-storage in uncertainty macro-economic conditions and investment markets. Self-storage continues to offer steady performance and investment yields in times of economic and real estate volatility.

As an example, the current cap rate spread to 10-year Treasuries is 137 bps (but varies daily) and averaged 150 bps over the last eight quarters, but a wider range as a function of dynamic Fed movement and slower market reactions. Overall, the Treasury spreads have been at record lows in the last eight quarters compared to the 20-year time trend.

See Treasury Interest Rates & Self-Storage Cap Rates chart.

The First Quarter 2026 Investor Survey results show a wider increase for Class-B and Class-C assets, but not much change in Class-A, suggesting quality still matters. Market participants expect interest rates to increase or remain stable, a change from prior optimism of rate declines. As a result, equity dividends are expected to remain level or decline, putting upward pressure on investment rates. A near-term end to war would help the market, but lagging inflation indicators may suggest dynamic results in the next two quarters. Throughout the storms, self-storage remains safe harbor.