Why is 90 percent occupancy not always the right assumption?

If every deal you see assumes 90 percent-plus occupancy, pause.

The state-level and non-REIT data tell a more nuanced story. Most states report occupancy between 80 percent and 90 percent, with a total weighted average of 88.3 percent. Storable’s 25,000-plus facility dataset averaged 81.8 percent over the last year. That does not mean a strong facility cannot run above 90 percent. It means buyers should not blindly assume 90 percent in every market. Stabilized occupancy depends on supply, population growth, competition, pricing discipline, management quality, and seasonality. When a facility is bought or sold, the occupancy usually takes a hit. Many of our underwrites don’t anticipate an increase in economic occupancy until after the first year because we acknowledge a stabilization phase. Some tenants will get annoyed by the transition to new management and new policies. Delinquent units may be auctioned off rather than provide phantom occupancy figures. In today’s environment, disciplined buyers underwrite a range of occupancy outcomes, not a single optimistic number.

What does normal occupancy really look like?

A lot of people still underwrite self storage like it is 2021. That is dangerous.

REIT weighted occupancy peaked at 96.6 percent in Q2 2021, while non-REIT occupancy peaked at 90.0 percent. By Q4 2024, occupancy had bottomed at 90.4 percent for REITs and 80.9 percent for non-REITs. The lesson is not that storage is broken. The lesson is that pandemic-era occupancy was not normal. If a seller presents peak occupancy as stabilized performance, buyers should normalize the numbers. A good underwriting model should account for seasonality, local supply, concessions, and the difference between physical and economic occupancy. While delinquent units present an opportunity for accounts receivable, they should not be counted as normal physical occupancy. We consider any unit greater than 60+ days as a vacant unit because they are less likely to come current, and a properly followed lien and auction process will result in an empty unit within 60 days usually. 

Why do construction starts matter more than headlines?

A market can look healthy today and still become risky if too much new space is already in motion.

In markets tracked by Matrix for at least 24 months, the under-construction pipeline declined 6.2 percent quarter over quarter to 49.79 million net rentable square feet and 17.3 percent year over year. That decline is encouraging, but it does not eliminate risk. Most of that inventory still needs to be delivered and absorbed. Construction starts also remain a leading indicator. If starts fall, future competitive pressure may ease. If starts rebound because rates grow and capital or construction gets cheaper, supply risk can return. For investors, the underwriting lesson is clear: do not evaluate occupancy and rent today without also evaluating what is scheduled to open tomorrow. Unless a municipality has barriers in place- such as a moratorium- an errant developer can throw a wrench into an entire market. We try to leave “meat on the bone” when looking at a market. If the equilibrium supply index for a market is 7- meaning 7 net rentable square feet per capita results in an average occupancy of 85%- we try to have the supply index come in at less than the equilibrium AFTER our development is accounted for. We’d like to see room for another 1 or 2 self storage facilities before the equilibrium supply index is hit so that we have a protective buffer to our lease up or stabilized occupancy. If we reach stabilized occupancy and there are no new developments to erode the buffer, then expansion can be considered.

Is the self storage supply pipeline slowing?

One of the biggest questions in self storage right now is simple: are we overbuilt? 

The supply data shows a mixed answer. Yardi Matrix increased its Q4 2025 forecast by 4.3 percent for 2025 and 4.6 percent for 2026, bringing expected 2025 completions to 59.44 million NRSF and 2026 completions to 48.23 million NRSF. But the more important trend is deceleration. The forecast still shows new self-storage supply declining through 2027 and beyond. That matters because new supply pressures rents, occupancy, and lease-up timelines. For buyers, the right question is not, 'Is storage still viable?’ The right question is, 'How much new storage is hitting this exact trade area?’. Storage is a hyper local business with 70% of renters coming from a 10 minute drive area from the facility. There used to be a “if you build it, they will come” mentality with self storage development. That’s not the case anymore. Many developers have been burned by fast and loose underwriting resulting in slow lease up. Even seasoned developers that did their homework pre-development have felt the impact as additional developments sprout up agnostic of supply and demand, tanking the entire trade area. Construction costs have risen significantly bringing pause to many builders who relied upon cheap materials and quick build times, especially in the southern regions of the US. Most of the already zoned, flat land in high population areas has been gobbled up. Municipalities are placing moratoriums on new storage after a glut of development in the late twenty-teens and early 2020’s. These realities have cause the self storage supply pipeline to slow but certainly not stop.

How big is the self storage industry?

Self storage is not a niche side business anymore. It is a multi-hundred-billion-dollar real estate sector. 

The U.S. self-storage industry is estimated at approximately $394 billion. The 2026 Self Storage Almanac also identifies 65,000-plus active facilities in the United States, more than 2.4 billion square feet, and over 3,900 known developments nationwide. That matters because scale changes how investors should think about the asset class. This is not just rows of garage doors. It is a national operating business with local demand drivers, fragmented ownership, pricing software, call handling, digital marketing, supply pipelines, and cap-rate discipline. For high-net-worth investors, the opportunity is not merely buying storage. It is buying cash-flowing businesses, that are also real estate, where operational improvement dramatically changes value immediately. Those elements have led to a lot of interest from big money, making this once small asset class one of the fastest growing.

How do I invest with SSSE?

At SSSE, we provide both accredited and non-accredited investors access to tax-advantaged self storage investments with an emphasis on downside mitigation and social stewardship. Our syndications range from acquiring existing value-add self storage facilities to expanding existing facilities, from converting vacant big box stores into self storage to building from the ground up. The first step to investing with SSSE is to fill out our investor onboarding webform. It is quick and easy and can be found on our website SSSE.com by clicking the “Investors” menu link in the upper left corner. Once you have submitted your investor webform, you will have the opportunity to schedule an introductory phone call with one of our investor relations team members. A scheduling program will automatically appear. After that, stay tuned for the next investment opportunity! If we have any active raises occurring that are a good fit for your investor profile, our investor relations team member will let you know on the call and will walk you through getting access to the investor portal. Otherwise, we typically will send out an email whenever there is a new investment opportunity. It will have the high level details including whether it is a 506(b) syndication (for both accredited and non-accredited investors that we have pre-existing relationships with) or a 506(c) syndication (for accredited investors only). There will also be a link to the investment opportunity’s web page! On the webpage will be more details including a short description at the top, followed by buttons to schedule a call, access the investor portal to review the documents, and a video summary. The investment process concludes with accessing the investor portal and signing the subscription documents and wiring funds through the investment portal. Our investor relations team will be there to help every step of the way.

What is an accredited investor?

Often we get asked, what is an accredited vs. a non-accredited investor. We get asked this because only accredited investors can invest in 506(c) syndications. We do both 506(b) and 506(c), so if you’re not yet an accredited investor, if you invest in enough of our 506(b) offerings, you’ll be headed in the right direction. The Securities and Exchange Commission sets the definition of an accredited investor. The definition is subject to change but as of the time of this writing, an accredited investor is someone who meets one of the following 3 requirements. 1. Income. You can be considered an accredited investor if you have a sustained annual income of at least $200,000 as a single investor, or $300,000 total if combined with a spouse’s income. 2. Professional. If you hold a valid Series 7, 65, or 82 license OR are a “knowledgeable employee” of certain investment entities. 3. Net Worth. Excluding the value of your primary home, if you have a net worth of $1 million or more, by yourself or combined with your spouse, you qualify to be an accredited investor. A couple reminders: part of the 506(c) syndication investment process will be verifying that you are an accredited investor, so “fake it til you make it” does not apply. Lastly, I am not an attorney or investment advisor. This information is purely for educational purposes. Please consult your legal and financial counsel for any questions, guidance, or advice.

How much does a ground up development cost to build?

The cost to build a multi-story, temperature controlled, self storage facility is going to be one of the most expensive ways to build self storage. Self storage is primarily made of steel and concrete, with steel being a highly traded commodity susceptible to supply chain disruptions, geopolitical factors, and economic events. As a result, the cost to build any type of self storage can vary greatly from location to location, month to month. As of the time of this writing, we have seen the cost of building a class-A, multi-story, temperature controlled self storage facility range from $75 to $125 per square foot. Decisions like how many stories, how many elevators, smart locks, etc. will increase prices. There are ways to reduce costs like prefabricated components that are flat shipped and assembled on site. Involving your general contractor in the equity stack and incentivizing price reductions through a profit share structure can help ensure the best price and timely performance. We believe in getting multiple bids on every job.

How much money do I need to invest as a syndication participant?

How much you need to invest as a syndication participant is dependent on the investment opportunity. The syndication sponsors set the minimum investment amount and communicate that to the potential investors. This can be as little as $25,000 but can be much higher. There is often a maximum investment amount as well in order for the syndication sponsors to protect ownership interest so that a single investor does not come in and take over a deal or break a threshold which would require an investor to be a loan guarantor based on their ownership percentage. Each of our syndications at SSSE has the minimum investment and maximum investment established on a deal by deal basis with our lowest minimum investment at $25,000.

How does self storage compare to other real estate assets in regards to return on investment?

Self storage has the highest return on investment in comparison to any other real estate asset class. From 1994-2017, storage returned an annual average of 17.43%. Based on that annual average, $100,000 invested in 1994 would be over $4,000,000 as of 2017. In comparison, if you invested in apartment buildings over that same time, the $100,000 would be $1,774,397 as of 2017.

2017 Value of $100,000 Invested in 1994 Based on Average Annual Return by REIT Sector

Is self storage recession resilient?

From 2007-2009, self-storage dropped -3.8% in comparison to the S&P’s -22.0%. This was the smallest drop of any real estate asset class. Self storage had some of its best performing years during the COVID-19 Pandemic when some other real estate asset classes performed poorly. According to Trepp, a Commercial Mortgage Backed Securities research firm, of the 1,700 CMBS loans made to self storage in the first 3 quarters of 2020 only 3 were delinquent– that is a 0.17% delinquency rate . During the same time multi-family was defaulting at a rate 1,800% higher or 18x that of self storage.

Do banks like to loan on self storage?

From 2011-2018, self storage had the lowest default rate of any real estate asset class. When those rare few properties did default, the banks only lost an average of 1.52% per default. According to Trepp, a Commercial Mortgage Backed Securities research firm, of the 1,700 CMBS loans made to self storage in the first 3 quarters of 2020 only 3 were delinquent– that is a 0.17% delinquency rate . During the same time multi-family was defaulting at a rate 1,800% higher or 18x that of self storage. Lending on self storage is one of the safest loans a bank can make.

Is self storage easy to manage and operate?

Self storage often has one of the lowest expense ratios of real estate assets due to its minimal staffing requirements, simplified construction, and low turnover costs. By leveraging technology and online tools, self storage facilities can often be operated by a few key employees or even fully automated. The simplified construction of steel and concrete with reduced utilities results in lower ongoing maintenance. When a renter moves out, the turnover cost and process is not like a tenant moving out of an apartment; disposal and broom sweeping are all that are needed in most scenarios.

What is the break-even occupancy needed for self storage?

Un-leveraged self storage facilities have break-even occupancy figures in the low to mid 30% occupancy range. Leveraged assets have break-even occupancy figures in the low to mid 60% occupancy range. This is partially due to much lower overhead because of no “tenants, toilets, and trash”.

How is self-storage revenue generated?

Self-storage revenue is generated primarily through rental income from tenants. This rental income is typically collected on a monthly basis and is based on the size of the rental unit and the rental rate in the market. In addition to rental income, some self-storage facilities may generate revenue from additional services such as insurance, truck rentals, and retail sales of moving and storage supplies. Some facilities may also generate revenue from late fees, auction proceeds, and other charges related to delinquent accounts. Overall, self-storage revenue is a combination of rental income and income from ancillary services, and it can be influenced by factors such as occupancy rates, rental rates, competition in the market, and local economic conditions.

What is the typical revenue per square foot for a self-storage facility?

The typical revenue per square foot for a self-storage facility varies depending on a number of factors such as location, competition, occupancy rates, and the mix of unit sizes. On average, the revenue per square foot for self-storage facilities ranges from $10 to $25, but can be higher or lower depending on market conditions. Higher revenue per square foot typically indicates a more profitable facility, but there are many factors that can influence revenue per square foot, including rental rates, occupancy rates, competition, local economic conditions, and the cost of operating the facility. It is important to note that revenue per square foot is just one metric used to measure the performance of a self-storage facility, and a more comprehensive analysis of financial performance should consider factors such as operating expenses, occupancy rates, and cash flow.

According to the 2022 Self-Storage Expense Guidebook by MiniCo Insurance Agency, the national average effective gross income per square foot for 2022 was $13.75.

What is the typical operating expense ratio for self-storage?

The typical operating expense ratio for self-storage facilities ranges from 30% to 55% of gross operating income. Operating expenses for self-storage facilities can include property taxes, insurance, utilities, maintenance and repairs, management fees, marketing and advertising, legal and professional fees, and payroll. The exact operating expense ratio for a self-storage facility will depend on a number of factors such as the size and location of the facility, local economic conditions, and competition in the market. In general, a lower operating expense ratio is desirable as it indicates that a larger portion of revenue is being retained as net income. It is important to note that the operating expense ratio is just one metric used to measure the financial performance of a self-storage facility, and a more comprehensive analysis should consider factors such as occupancy rates, rental rates, and cash flow.

According to the 2022 Self-Storage Expense Guidebook by MiniCo Insurance Agency, the national average operating expense ratio for 2022 was 41.79%.

What is the typical cap rate for self-storage?

The typical cap rate for self-storage facilities ranges from 6% to 9%, but can be higher or lower depending on a number of factors such as location, competition, and the overall health of the self-storage market. The cap rate is a measure of the rate of return on investment that an owner can expect from a self-storage facility and is calculated as the net operating income divided by the purchase price. A higher cap rate indicates a higher return on investment, and a lower cap rate indicates a lower return. Factors that can impact the cap rate for self-storage facilities include the local real estate market, competition, occupancy rates, rental rates, and operating expenses. It is important to note that the cap rate is just one metric used to measure the financial performance of a self-storage facility, and a more comprehensive analysis should consider factors such as cash flow, occupancy rates, and rental rates.

How does self-storage compare to other real estate investments?

Self-storage can be compared to other real estate investments in terms of investment return, risk, and stability.

Investment return: On an individual facility level, self-storage has historically provided solid returns for investors, with returns typically ranging from 6% to 9% based on the cap rate. However, returns will vary based on location, competition, occupancy rates, and operating expenses. On a macro economics level, self storage has the highest return on investment in comparison to any other real estate asset class. From 1994-2017, storage returned an annual average of 17.43%. Based on that annual average, $100,000 invested in 1994 would be over $4,000,000 today.

Risk: On an individual facility level, the level of risk for self-storage is relatively low compared to other types of real estate investments. The demand for self-storage is generally stable and not tied to the performance of the broader economy. Additionally, self-storage tenants typically sign lease agreements, which provides a steady stream of rental income. However, as with any real estate investment, the value of the property can be impacted by economic downturns, changes in competition, or local zoning regulations. On a macro level, from 2007-2009, self-storage dropped -3.8% in comparison to the S&P’s -22.0%. This was the smallest drop of any real estate asset class. Self storage had some of its best performing years during the COVID-19 Pandemic when some other real estate asset classes performed poorly. According to Trepp, a Commercial Mortgage Backed Securities research firm, of the 1,700 CMBS loans made to self storage in the first 3 quarters of 2020 only 3 were delinquent– that is a 0.17% delinquency rate . During the same time multi-family was defaulting at a rate 1,800% higher or 18x that of self storage.

Stability: Self-storage is considered a stable real estate investment due to the consistent demand for storage space. Even during economic downturns, the demand for self-storage typically remains strong as people downsize or move to new locations. The stable demand and predictable rental income make self-storage a relatively stable investment compared to other types of real estate.

Overall, self-storage can be a solid real estate investment for those looking for a lower-risk, stable investment with solid returns. However, as with any investment, it is important to thoroughly research the market, competition, and local economic conditions before making a decision.

What are the most important factors in buying a self-storage facility?

The most important factors in buying a self-storage facility are:

Location: The location of the self-storage facility is critical in determining its success. Factors to consider include population density, economic conditions, competition, and accessibility.

Occupancy and Rent Rates: The occupancy and rent rates of the facility will have a direct impact on its revenue and profitability. It's important to research the current and projected market conditions to determine the potential for growth.

Operating Costs: The operating costs for a self-storage facility include utilities, insurance, maintenance, marketing, and management. It's important to have a clear understanding of the operating costs before purchasing a facility, to ensure that the revenue from the facility will be sufficient to cover these costs and generate a profit.

Physical Condition: The physical condition of the self-storage facility is also an important factor to consider when buying. Factors to consider include the condition of the buildings and grounds, security features, and any necessary repairs or upgrades that may be required.

Legal and Regulatory Environment: The legal and regulatory environment of the self-storage industry can vary widely by location. It's important to research and understand any local zoning, permitting, and licensing requirements before buying a facility.

Management Team: The management team is critical to the success of the self-storage facility. It's important to have a clear understanding of the management structure, experience, and skills of the current management team, or to consider hiring a management company if necessary.

Financing Options: The financing options for a self-storage facility can vary widely depending on the type of facility, its size, location, and financial condition. It's important to research and understand the financing options available and to work with a lender that has experience in the self-storage industry.