Homeowners’ demand for self storage has been growing in the nation’s largest metros. While the industry has always helped with moving and decluttering, lately, it’s also been answering pandemic-triggered challenges, such as the downsizing of homes and business spaces. In response, the development of new self storage facilities is quite active — which should interest both investors, as well as homeowners seeking to maximize their living space.
For example, the national average street rate for a non-climate-controlled, 10’x10’ storage unit — now standing at $128 per month, rose 6% in 12 months and double that in several large metros. Specifically, developers have been responding to increasing demand and a widening customer base as many people recently used self storage for the first time when their homes had to do extra duty as offices, schools, gyms, play areas and stores.
Nationwide, more than 131 million square feet of new storage space is currently in the pipeline, which will add 9% to the existing storage inventory of more than 1.6 billion rentable square feet, according to Yardi Matrix data.
In particular, development activity is strongest in metropolitan areas with an undersupply of self storage. To that end, RentCafe ranked the largest U.S. metros by rentable square footage that currently have self storage developments planned or under construction. Notably, they found that New York leads development: The city is building new space equivalent to almost one-sixth of its inventory. LA is also following suit, with more than 6.3 million square feet of storage space planned or under construction.
Similarly, there’s also vigorous self storage development where high inbound migration fuels demand. Two such areas — the metros centered around Dallas and Phoenix — are each adding around 5 million square feet of storage. Likewise, among the top 10 metros for self storage development, the Miami metro experienced the greatest increases in rent — an average of 17% — and is adding nearly 4 million square feet of storage.
Metro New York Surges with Most Self Storage Development
A gateway for migration, NYC also has the nation’s most undersupplied self storage market, with only about two square feet of space per capita — much less than the national benchmark of 7.1. Accordingly, self storage development in metro New York is much higher than anywhere else in the country: Almost 12 million square feet is in the pipeline, with around half of that due to be delivered this year. That’s equivalent to no less than 17% of the city’s existing inventory of nearly 72 million square feet.
This will help in easing the space restrictions that New Yorkers often experience, and the many new climate-controlled units will also keep their items safe from the weather, as well.
More precisely, Queens is the NYC borough with the most planned and under-construction self storage (almost 1.3 million square feet of space). And, with only half of that amount being developed, Staten Island is the runner-up. Both boroughs are a short trip from Manhattan’s central districts, but tend to have more affordable housing, thereby making them attractive places to move to.
And, because self storage is strongly associated with moving and home improvement, the new development in these boroughs is well-motivated. For its part, Manhattan is adding almost 360,000 square feet of storage space to its existing inventory.
Undersupplied L.A. Building 2nd-Most Storage
It’s certainly no coincidence that the metro with the second-largest amount of planned and under-construction self storage space — Los Angeles-Long Beach-Anaheim — has an undersupply problem like New York. Here, there’s only four square feet of self storage space per person.
However, the development pipeline counts 6.3 million square feet, which is equivalent to about 9% of the current inventory (an area 15 times the size of Disneyland), to add to the existing inventory of around 68 million square feet.
Expanding Dallas-Fort Worth & Phoenix Build Much More Storage
The thriving Dallas-Fort Worth-Arlington area attracts people and businesses — and the self storage industry is expanding to cater to them. Specifically, DFW has 5.4 million square feet of storage in the pipeline, which will add to its inventory of 72 million square feet.
Despite an already generous provision of eight square feet per capita (as well as a reasonable average rent of $104 per month for a 10’x10’ unit), the Dallas self storage market — lifted by the city’s rapid growth — is the third-most active in the U.S.
To the west, the Phoenix-Mesa-Scottsdale metro has also been growing fast, and it, too, offers around eight square feet of self storage per capita. Even so, more is in the works, landing the metro in fourth place for new development with 4.6M million square feet being added to an inventory of 36 million square feet.
The Phoenix self storage sector even raised its street rates by an average of 14% year-over-year (Y-o-Y). Now, a standard unit rents for $126 per month, on average. Fortunately, the snowbirds who flock to the Phoenix metro for the winter drive demand by keeping their seasonal belongings in storage when they’re not in town.
Miami’s Special Status Creates Drivers for Self Storage Demand
On the opposite coast, the Miami-Fort Lauderdale-West Palm Beach area has almost 4 million square feet of storage space in development, giving it a fifth-place ranking. This will add to an existing inventory of more than 40 million square feet, which works out to six square feet per person.
Clearly, demand for Miami self storage is strong, judging by the 17% Y-o-Y average street rate increase — the steepest among large U.S. metros — and despite an average monthly rate of $168 for a 10’x10’ unit. Here again, those visiting Miami for sports or winter sun create strong demand for the local storage sector.
Philly, Atlanta & Washington, D.C. Develop Storage
To the north, the Philadelphia-Camden-Wilmington metro is up there with NYC and LA as a large self storage market that is traditionally undersupplied, offering only four square feet per person. Here, around 4 million square feet of storage space is currently in the pipeline, which is equal to about 15% of the current inventory of nearly 26 million square feet. This puts the Philadelphia metropolitan area in the sixth position for planned and under-construction storage development.
Next up, the Atlanta-Sandy Springs-Roswell area takes seventh place for development of self storage, with 3.5 million square feet of planned and under-construction storage space. Of course, Atlanta is a rapidly growing metro, drawing in both people and businesses — and its self storage sector is on hand to help with the processes of moving and settling in.
Currently, the city’s self storage inventory is 40 million square feet, offering seven square feet per capita. But, with average street rates rising a sizable 15% Y-o-Y, investors will see plenty of room for more storage.
One place further down the rankings, the Washington-Arlington-Alexandria metro comes in eighth nationally for self storage development. In the nation’s capital, 3 million square feet of storage space is planned or under-construction, which will supplement the current inventory of around 46 million square feet.
Plus, with Washington, D.C.’s stable and diversified economy, there’s always an influx of new employees. Many of the new arrivals settle in neighboring Arlington and Alexandria, thereby creating demand for self storage throughout the metropolitan area.
Las Vegas Storage Spreads in Suburbs, Chicago Develops in Urban Areas
The Las Vegas-Henderson-Paradise area ranks ninth for new self storage development. In line with its growth from an entertainment hotspot to a desirable place for families and businesses, the city is spreading rapidly — and the Las Vegas self storage sector is following suit.
To deal with the needs of people moving in (not to mention the many tourists and snowbirds who visit), Vegas offers a generous nine square feet per person. But, with the average local street rate increasing by 10% Y-o-Y (it’s currently $128 per month), there’s clearly still room for more.
Completing the top 10 of metros with the most self storage in development, the Chicago-Naperville-Elgin metro has 2.6 million square feet of storage currently planned or under construction. That’s equivalent to around 5% of its inventory.
However, compared to Las Vegas, Chicago self storage development is concentrated in urban locations. And, with the city’s average apartment size of around 750 square feet — significantly smaller than the national average of 882 square feet — self storage is understandably in demand here. Fortunately, the cost of a self storage unit in Chicago is a reasonable $114, a 7% Y-o-Y increase.
Expanding Metros See More Storage Development Activity in Suburbs
As customers’ storage requirements increase and change, traditional rows of lock-up garages at the edge of town have been joined by multi-story buildings in city centers. Granted, self storage development trends vary by metro. For instance, Chicago and Atlanta are seeing no less than 91% and 87%, respectively, of their development activity in urban settings.
Similarly, the NYC and Washington, D.C. metros follow the same pattern, with 80% and 85%, respectively, in urban areas. Meanwhile, at least two-thirds of self storage development in Dallas and Philadelphia is urban.
At the other end of the spectrum, 65% of Las Vegas’s self storage development is taking place in suburban locations, which befits the way the city is growing. Moreover, development in the metropolitan areas of Miami and Phoenix — where some suburbs are fast-growing cities in their own right — is split roughly half-and-half between urban centers and outer areas. And, in Los Angeles, 43% of development is away from the city core.
Repurposing Makes Sense, but New Builds Still Win
Often, developers find that reusing retail sites — often located away from city centers — not only provides storage space for a community at a lower construction cost, but also pleases city halls by eliminating unsightly vacant lots. In this respect, Miami is the metropolitan area among the top 10 that most prefers to repurpose other buildings for storage, with 18% in that category and 82% new builds. Likewise, repurposed storage development in Dallas and LA accounts for 16% and 15%, respectively.
Conversely, with New York City’s high prices and returns on investment, building new self storage facilities is most common, with 96% of new developments taking that form. Philadelphia and Las Vegas follow closely behind with 95% and 94%, respectively, of new developments. In LA, the equivalent figure is 85%. Clearly, with increased demand for storage from urban dwellers, purpose-built premises are still favored by many developers.
Self Storage Fundamentals Expected to Remain Strong
Even as health concerns somewhat recede, habits that changed during the last two years may still remain. That’s because the new reasons that people discovered for using self storage will continue to help them maximize their lifestyles, including working from home and carrying on with the outdoor activities they’ve taken up.
As such, self storage operators and investors can look forward to continued demand. And, as a result of development, customers should be seeing even more facilities nearby with a range of storage options to suit their requirements.
