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Yardi Reports Drop in Self-Storage Street Rates Despite Peak Season

Self-storage operations grapple with pricing guidance and financing hurdles.

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Good morning. Self-storage operations grapple with pricing guidance and financing hurdles. Plus, sentiment on the impact of mortgage and cap rates in commercial real estate remain divided.

Today’s issue is brought to you by Southern Ventures.

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Yardi Matrix Reports Drop in Self-Storage Street Rates Despite Peak Season

Yardi Matrix Reports Drop in Self Storage Street Rates Despite Peak Season

The self-storage industry is navigating softening demand, with a general decline in street rates sparking a competitive pricing war among operators.

Rate reductions: According to Yardi Matrix, the average annualized same-store asking rent per square foot has fallen by 4.5% year-over-year and 3.8% since last month. This trend is even more pronounced among REITs, with a notable 6.6% drop in same-store street rate growth compared to a 3.6% decrease among non-REIT properties. Twice as much as non-REIT operators to draw in new customers.

Region breakdown: All top 31 metro areas recorded negative growth in street rates year-over-year. Denver saw the smallest decline at -2.4%, while Atlanta experienced the sharpest drop at -7.5%. Nationwide, the average fell by 0.2%, countering the expected increase during the typically busier leasing season. Columbus emerged as the most budget-friendly metro, with street rates at just $11.96 per square foot.

Source: Yardi Matrix

Supply stalls: New storage facilities comprised 8.5% of the total stock at the start of the last three years, but recent months have witnessed a stagnation, with only 2.9% of that figure delivered in the past year. Philadelphia led in new supply, contributing 15.3% to its starting stock. The total development pipeline tracked by Yardi Matrix included 3,521 properties at various stages, with 877 currently under construction.


Why it matters: Despite March's typical peak leasing season, self-storage rental rates dipped in major metros, testing market stability. This slowdown may be curbing new supply as the sector recalibrates. Nonetheless, developers maintain a strong interest in self-storage, underscored by Public Storage's aggressive expansion, including its $2.2B acquisition of Simply Self Storage after a $10B investment in other properties over the past four years.


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✍️ Editor’s Picks

  • Inflation nation: The latest Personal Incomes and Outlays report suggests persistent inflation may delay anticipated interest rate cuts until at least July.

  • Wealth wave: Scottsdale, Arizona, has become a top housing market fueled by an influx of migrating millionaires.

  • Investment hurdles: The "good cause" eviction law is complicating value-add real estate projects and deterring investors by making tenant evictions more challenging.

  • Sunshine shift: Glenview Capital Management's billionaire Larry Robbins is relocating with his family to Hobe Sound, Florida, continuing the trend of New York hedge funders moving south.


  • Population paradox: Despite an influx of immigrants boosting residency potential in states like California, Texas, and Florida, gateway markets are experiencing overall population declines.

  • Exceeding expectations: AvalonBay's first-quarter revenue outperformed its initial 2024 projection of a 3.3% increase. CEO Ben Schall noted that apartment demand is still driven by the cost differential between owning and renting.

  • South Side: CKO Investments and Milwaukee’s F Street Investments are acquiring 19 distressed buildings in Chicago's Hyde Park and South Shore for $35M, adding 518 apartments to their portfolio despite the properties' financial challenges.

  • Tax transition: Following the expiration of the 421-a tax break in June 2022, NYC developers are now exploring the 485-x program, calculating its potential to boost affordable housing development compared to its predecessor.

  • Strong rebound: The U.S. multifamily market saw its highest demand since Q3 2021, with 104,000 units absorbed in the first quarter, fueled by economic growth and rising consumer confidence.

  • Revenue growth: Equity Residential’s revenue increased at the start of 2024, boosted by demand from its target demographic of well-paid, highly educated renters.

  • Withdrawal: The AIDS Healthcare Foundation has canceled a planned $27 million purchase of six single-room occupancy hotels and apartment complexes in L.A.'s Skid Row.

🏭 Industrial

  • Completion: Echo Real Estate Capital has finished developing Echo Park 303, a massive two-building industrial park in Glendale, Arizona, spanning 676,176 square feet.

  • Valuation surge: Industrial property valuations in Dallas County have soared, increasing by 53 to 70 percent over the last year, according to the latest estimates from the Dallas Central Appraisal District released on April 15.

  • New tenant: A furniture company has become the first official tenant at Post Oak Logistics Park in Southwest Houston, securing a 168,893 SF lease at the newly opened industrial campus.

  • Order uptick: According to the U.S. Census Bureau, new orders in February increased by an average of 3.6 percent, totaling $19.4 million, with the Fabricated Metal Products sector leading the surge at 7.1 percent.


  • Juiced up: Blackstone has inked a deal to purchase Tropical Smoothie Cafe from Levine Leichtman Capital Partners for nearly $2 billion, including the assumption of debt.

  • Revival: A Pennsylvania lawmaker is advocating for a tax abatement to prevent a "retail apocalypse" by motivating developers to diversify the use of struggling mall properties.

  • Discounted deal: Regal Ventures, a New York-based investor, acquired the Lincoln Park retail center Belden Centre for $11.2 million, or around $203 per square foot.

  • Platinum Corridor: Lionstone Investments has sold Muse Shops at Midtown, a 112,162-square-foot value-add retail center in Dallas, to Morgan Stanley. JLL Capital Markets facilitated the sale.


  • Streamlining: Microsoft plans to cut millions of square feet of office space, aiming to reduce its annual lease payments by $1.5 billion by 2028 in an effort to eliminate excess capacity.

  • Market pulse: As of March 2024, the U.S. office market had an 18.2% vacancy rate, a 1.3% drop in listing rates to $37.74, with sales averaging only $171 per square foot.

  • Boost: Amid record-high office vacancies, Blue Ops is expanding its Chicago presence by tripling its office space to 28,000 square feet at 200 South Michigan Avenue.


CRE Industry Cautious on Future Rate Cuts and Cap Rate Movements

A recent survey by the CRE Finance Council reveals mixed feelings about the future of mortgage and cap rates in the commercial real estate sector.

Shifting sentiment: The majority of survey participants anticipate fewer rate cuts than previously expected, adjusting down to possibly one or none in 2024, contrary to the Federal Reserve's projections of three. This recalibration of expectations comes amid stronger economic signals and persistent inflation, challenging the earlier more optimistic outlooks.

Strategies: The survey also sheds light on refinancing strategies, with 56% of respondents favoring loan extensions that incorporate credit-positive provisions. Comments from industry experts reveal a strategy of resilience, leveraging capital from alternative lenders and adapting to the "kick-the-can" approach by current lenders, anticipating future challenges in 2025-26 due to elevated rates.


Big picture: While the first quarter of 2024 showed a decrease in optimism, with only 31% of respondents seeing a positive impact compared to 48% last quarter, concerns grow as the US Federal Reserve hints at limited forthcoming rate cuts. These economic conditions are leading to adjustments in the market, including increased capitalization rates and a recalibration of asset valuations.


CRED iQ compared recent loans from December 2023 against those from 2011, just after the 2008/2009 financial crisis. The study focused on the underwriting changes for the same asset across two distinct commercial real estate cycles.

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