Surging Mortgage Rates Put The Brakes On Home Sales, Squeeze Self-Storage Demand And Drive Down Rental Rates
With high mortgage rates resulting in slower home sales, people aren't moving around as much, which is impacting the demand for self-storage space and resulting in lower asking rates for units.
Rental rates dropped 4.1% year over year in October, a slight improvement from an average being down 4.3% throughout the third quarter, according to Yardi Matrix's November National Self Storage Report. Atlanta continued to see some of the weakest performance for rental rates, with a decline of 7.5% year over year.
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The best-performing metro was Portland, which saw rental rates decline by 0.4% month over month in October.
Metro | September Average Rental Rate | October Average Rental Rate | Month-Over-Month Change |
National | $17.04 | $16.77 | -1.6% |
Portland | $18.09 | $17.96 | -0.4% |
Pittsburgh | $17.04 | $17 | -0.7% |
Seattle | $21.93 | $21.76 | -0.8% |
Atlanta | $14.78 | $14.62 | -1.2% |
Charlotte, NC | $13.99 | $13.84 | -1.2% |
Houston | $13.36 | $13.20 | -1.2% |
Philadelphia | $17.65 | $17.42 | -1.2% |
Dallas-Fort Worth | $14.02 | $13.85 | -1.3% |
Minneapolis | $13.81 | $13.63 | -1.3% |
Nashville, TN | $16.28 | $16.07 | -1.3% |
Raleigh-Durham, NC | $13.81 | $13.65 | -1.5% |
Miami | $21.91 | $13.65 | -1.6% |
San Antonio, TX | $25.20 | $14.82 | -1.6% |
Phoenix | $16.17 | $15.90 | -1.6% |
Orlando, FL | $16.39 | $16.13 | -1.7% |
Washington, D.C. | $19.93 | $19.58 | -1.7% |
Columbus, OH | $12.85 | $12.62 | -1.8% |
San Diego | $25.20 | $24.74 | -1.8% |
Austin, TX | $14.88 | $14.62 | -1.9% |
Tampa, FL | $16.61 | $16.31 | -1.9% |
San Francisco | $27.19 | $26.67 | -1.9% |
Inland Empire, CA | $18.01 | $17.65 | -1.9% |
Sacramento, CA | $18.31 | $17.92 | -2.1% |
Chicago | $15.36 | $15.03 | -2.2% |
Denver | $17.32 | $16.95 | -2.2% |
San Jose, CA | $23.95 | $23.40 | -2.3% |
Los Angeles | $29.03 | $28.29 | -2.5% |
Las Vegas | $16.10 | $15.76 | -2.6% |
Charleston, SC | $15.77 | $15.34 | -2.7% |
New York | $35.33 | $34.33 | -2.9% |
Boston | $20.87 | $20.22 | -3.1% |
Source: Yardi Matrix Nov. 9 data
Delivery of new storage units also is dropping. Nationally, the amount of new supply delivered over the past three years equals 8.5% of inventory. Over the last 12 months, deliveries account for just 2.7% of inventory.
For the first half of 2023, the under-construction pipeline averaged 53.3 million square feet. It expanded to 55.5 million square feet in the third quarter, representing a 5.5% increase quarter over quarter and a 15.7% increase year over year.
Although starts increased at the beginning of the year, they seem to be leveling out and are expected to slow in the fourth quarter and into next year.
Yardi Matrix tracks 5,006 self-storage properties in various stages of development nationally, including 864 under construction, 1,940 planned, 673 prospective, 1,457 abandoned and 72 deferred properties. The share of projects under construction nationwide was equivalent to 3.8% of existing stock in October.
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