Storage Monitor: Rents and Occupancy Continue Retreat From Historic Highs
While inflation continues to bubble up and the banking sector takes a tumble, the self-storage industry continues to weather the storm.
It’s true that self-storage rents have continued their downward slide through the first quarter of 2023, but the latest Storable data shows the rate of decline has slowed compared to the sharp drop operators experienced during the final months of last year.
Overall occupancy has also declined so far in Q1, but also at a slower rate than it did in Q4 2022. On the bright side, the ratio of move-ins to move-outs is heading in the right direction—suggesting that the storage industry is on solid footing as it cautiously approaches the spring leasing season.
Keep reading for a closer look at the latest self-storage industry data from Storable.
After peaking in July 2022 at an average price of $116.50 per month, storage rental rates have fallen nearly 16 percent to a current monthly average of $97.96 (as of March 21, 2023). The current average is more than 10% less than it was a year ago. Compared to two years ago, the current rate is just 1% higher than it was.
The good news for storage operators is that the month-to-month rate of price declines are slowing down as the average approaches its seasonal low point. As the table below shows, prices fell rapidly from the July peak but started to ease off at the beginning of the year. Since January the pace has slowed, with prices charged by storage operators declining less than a percent each month.
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This trend suggests that many operators are reaching an equilibrium between supply and demand, and aren’t needing to discount prices much further to attract tenants.
Overall, occupancy is down about 3.8% in the first quarter of 2023 compared to the same quarter last year.
As with pricing, occupancy rates have continued to fall so far in 2023 but at a slower rate than they did at the end of 2022. Average occupancy fell an average of more than 8 basis points each month in Q4 2022, so far this quarter rates have fallen an average of 5 basis points each month.
Move ins and move outs
Move-ins have outpaced move-outs so far in 2023 for a ratio of 1.07. That means about 107 new tenants moving in for every 100 that moved out. That is a slight improvement from last quarter in which only 98 tenants moved in for every 100 that moved out.
While that’s good news overall, operators are replacing older tenants paying historically high rentals rates with newer tenants paying lower rental rates. This trend will continue to create downward pressure on revenue and NOI for operators in 2023.
What’s coming next
The slowdown in pricing and occupancy declines is a welcome trend for operators as they prepare for the busy season. The more pricing power that they can hold on to over the next weeks the better they will fare in the spring and summer. As demand picks up, we are likely to see a return to more normal patterns of seasonality through 2023. That is provided there are no unforeseen economic shocks to the system.
In the meantime, operators should do everything they can to streamline their businesses to cut expenses, while continuing to optimize rental rates while maintaining occupancy. Learn more about how Storable can help you meet your goals.