An Analysis by Cody Bond
TROUBLE ON THE HORIZON
The national vacancy rate for the self storage sector (which includes both climate and non-climate-controlled units) rose 40 basis points over the first quarter, leveling off at 14.9%. That represents an increase of 130 basis points over the first quarter of 2019, which was previously thought to be the sector’s cyclical high.
Weakness was evident in rent growth across all regions and unit types. National rents for 10×10 climate and non-climate-controlled units fell by -1.2% and -0.4% over the quarter, respectively. Rents for 10×10 non-climate-controlled units saw their largest year-over-year decline on record at -3.2%. The Southwest and South Atlantic regions suffered the heaviest losses, with 10×10 non-climate-controlled rents falling by nearly 6% over the year. The West, the top performer of the regions, saw rents decline by -2.5% year-over-year.
National Occupancy Rates (50 Metropolitan Areas)
Source: Moody’s Analytics REIS
Nearly 50,000 new units came online during the quarter, though the majority of new construction came online in January and February. Over half of that number was concentrated in the West and South Atlantic regions, though the Northeast, Southwest, and Midwest regions each saw at least 8,000 new units. For comparison, the sector saw over 70,000 new units come online in the first quarter of last year.
Demand was noticeably weaker in the first quarter with only 4,500 units absorbed nationwide. For context, net absorption was recorded at over 41,000 units in the first quarter of 2019. Time will tell whether the second quarter, which is typically the sector’s strongest time of year, will see a rebound in demand for self-storage units…
Cody Bond is an Associate Economist at Moody’s Analytics REIS.