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.

Why do independent self storage owners still matter?

The big operators are everywhere, but they do not own the whole industry. 

The five largest operators account for 19.3 percent of facilities and 35.6 percent of rentable square footage. That leaves a very large independent market. In fact, owners outside the top 100 still represent 66.4 percent of facilities and 37.3 percent of rentable square footage. That fragmentation is why acquisitions remain such a major opportunity. Buyers can still find assets where professional management, revenue management, better websites, call tracking, and local marketing can move performance. For owners thinking about selling, fragmentation also means buyers are actively looking for well-located properties with clean financials and upside. One of the best strategies in self storage is aggregation. Another way to describe this same strategy is defragmentation. Smaller operators can buy individual self storage facilities and package multiple together to form portfolios for larger operators to buy. One of the biggest downsides to self storage is that it’s comparatively difficult to deploy capital. In multifamily, you can buy a single 500 apartment, Class-A complex and drop tens of millions of dollars, if not hundreds of millions of dollars easily. In self storage, even the largest of self storage facilities top out below $50 million. This difficulty in deploying large amounts of capital is a road block to large private equity groups and REITs. The biggest of players need to resort to acquiring other large operators to get the scale and volume necessary. Buying from independent operators- mom and pop owners that have 2 or less facilities- and accumulating regional portfolios of self storage, creates a more attractive product as a result of appeasing the desire to deploy larger check sizes. Just by aggregating these independent facilities, a premium is applied as a result of the scale of investment. We find that a 20% plus premium is possible just by aggregating individual facilities into a larger portfolio. As the larger operators accumulate more of the independent facilities, the self storage industry becomes less fragmented.  

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.

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 market competition like for self storage?

The market competition for self-storage varies depending on location and the number of facilities in the area. In some markets, there is high competition among self-storage operators, while in others, there is limited competition. Competition can affect rental rates, occupancy rates, and the overall performance of self-storage facilities. The self-storage industry has seen significant growth in recent years, with new operators entering the market and existing operators expanding their portfolios. This growth has led to increased competition in some markets, which has driven innovation and improvements in the self-storage product offering.

According to Mini-Storage Messenger, in 2022 there were 51,206 self storage facilities up from 50,523 in 2021.

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.

Which real estate asset class performs best in a recession?

It is difficult to determine which real estate asset class will perform best during a recession, as real estate markets are influenced by many factors, including the overall economy, local market conditions, and the specific asset type. However, the following 4 asset classes are generally considered to be more resilient during a recession, with one clear winner.

Essential use properties: Properties with essential uses such as supermarkets, drug stores, and grocery stores tend to be more resilient during a recession as people still need to purchase necessities even during tough economic times.

Multi-Family Housing: The demand for rental housing typically remains relatively stable during a recession, making multi-family housing a relatively safe investment during tough economic times.

Industrial Properties: Industrial properties such as warehouses and distribution centers are often less affected by a recession, as the demand for goods and services continues even during a downturn.

Self-Storage: Self-storage facilities are considered to be the most recession resilient real estate asset. People may need to store their belongings due to downsizing or other economic factors. Historically, self storage has performed the best of any real estate asset in recessions. 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. 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.

It is important to note that real estate performance during a recession can vary widely depending on the specific asset and market conditions. Additionally, a recession can result in a decrease in property values, which may impact real estate investors negatively. It is always advisable to conduct thorough research and consult with a professional before making any real estate investment decisions.

What questions should I ask a syndicator?

If you are considering investing in a real estate syndication, it is important to thoroughly vet the investment opportunity and the syndicator. Here are some key questions you should consider asking:

What is your track record and experience in the real estate industry?

What is the investment strategy for the specific property or portfolio?

How is the investment structured and what are my potential returns?

What is the timeline for the investment and expected exit strategy?

How will capital be raised and how will investor funds be used?

What is the risk profile of the investment and how is risk being managed?

Who will be responsible for managing the property and what is their experience?

What is the plan for addressing potential challenges or market downturns?

How will distributions and profits be allocated and paid to investors?

What is the fee structure for the syndicator and any other third-party providers?

What is the current market demand for the specific property type and location?

Are there any potential liabilities or concerns that the syndicator is aware of?

It is important to thoroughly research the investment opportunity and the syndicator, and to consult with a financial advisor before making any investment decisions.