Don’t call it a comeback—at least not yet.
Storage prices nationwide are rising, but remain lackluster compared to last year’s levels. Occupancy is also lower compared to the previous year, but appears to be holding steady. And in a more promising sign, the ratio of move-ins to move-outs is tracking closely to last year’s pace.
While the self-storage industry isn’t quite as frothy as it has been recently, it remains stable and healthy. That is especially true when you consider the turmoil affecting other commercial real estate asset classes.
To gain a better understanding of where self-storage operators stand half way through 2023, we’ll break down the latest numbers below. Let’s dive in:
Self-storage operators pushed rates higher in May and June, marking the first month-to-month average increase in more than a year. The average rate to rent a self-storage unit in May was $99.19 a month, a 2.38% increase from the previous month. In June, the average rate rose to $102.48—an increase of 3.21%
Still, those rates are much lower than the record setting rates operators achieved last summer. The average May rate was off from last year by 12.22%. In June the gap widened, with a year-over-year difference of 13.66%. On the brightside prices remain well above 2020 rates, even when adjusted for inflation.
One reason self-storage operators haven’t been able to push rates higher is declining occupancy. Compared to last year, occupancy was down 3.98% in May and 4.81% in June. So far in 2023, occupancy has remained relatively flat, with June occupancy equivalent to the occupancy rate in January.
During the second half of 2022, self-storage tenants moved out in large numbers as the COVID-19 pandemic faded aways as a motivating factor. At the same time, inflation, rising interest rates and a sluggish housing market put the brakes on new demand. As more tenants were moving out than moving in, the industry experienced a sharp decline in rates.
The good news is that the industry appears to have found a healthy equilibrium between occupancy and rates as indicated by the positive move in to move out ratio of the last few months.
In May, about 131 tenants rented a storage unit for every 100 that moved out. In June, there were 118 move-ins for every 100 move-outs, or a MI/MO ratio of 1.18. That is the same MI/MO ratio achieved in June 2022.
While occupancy and rate are subdued compared to last year, the numbers show the self-storage sector is in a good position for continued and sustained growth. There is no reason to expect a repeat of the high rate of tenant move outs experience last fall and winter this time around. Instead, operators can likely look forward to a return to the usual seasonal fluctuations. The challenge operators face now is how much they can push rates without sacrificing occupancy heading into the slower part of the year.
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