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.

What is the future outlook for the self-storage industry?

The future outlook for the self-storage industry is generally positive, as demand for storage space is expected to continue to grow. Some of the factors that are expected to drive growth in the self-storage industry in the coming years include:

Population Growth: As the population grows, demand for storage space is expected to increase, as people need more space to store their belongings. As of 2020, there is only 10.6% penetration meaning that 1 in 10 US households use self storage. There is an immense opportunity for that penetration rate to increase agnostic of population growth itself.

Urbanization: As cities become more densely populated, many people are downsizing their living spaces and turning to self-storage as a solution for their extra belongings.

E-commerce: The growth of e-commerce is expected to drive demand for self-storage, as more and more people order goods online and need somewhere to store them.

Innovations in Technology: Advances in technology are expected to continue to shape the self-storage industry, making it more convenient, efficient, and customer-friendly.

Investment Opportunities: The self-storage industry is seen as a relatively stable investment opportunity, with low default rates and predictable rental income. 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. Self storage is 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.

While there are some challenges facing the self-storage industry, such as increased competition and changes in local zoning regulations, the overall outlook is positive. As long as demand for storage space continues to grow, the self-storage industry is expected to remain a thriving sector of the economy.

What is the typical insurance coverage for self-storage units?

The typical insurance coverage for self-storage units can vary depending on the specific facility and the type of insurance being offered. Some common types of insurance coverage for self-storage units include:

Liability Coverage: This type of insurance protects the self-storage facility against claims related to injury or damage to property that occurs on the facility's premises.

Fire and Natural Disaster Coverage: This type of insurance covers losses related to fires, earthquakes, hurricanes, and other natural disasters.

Theft Coverage: This type of insurance covers losses due to theft or damage to stored property. Much of the liability lies with the renters in regards to their belongings as the leases can limit the value of items stored and require renters insurance.

Business Interruption Coverage: This type of insurance covers losses related to the interruption of business operations, such as those that may occur as a result of a fire or other disaster.

It is important for self-storage facilities to carefully review their insurance coverage and make sure that they have adequate protection against the specific risks they face. Some facilities may also require their tenants to purchase insurance coverage for their stored property, in order to provide additional protection. Tenants should be aware of the coverage that is included with their rental agreement, and should consider purchasing additional insurance if necessary to fully protect their belongings.

What are the typical security features for self-storage facilities?

The typical security features for self-storage facilities can vary depending on the size and location of the facility, as well as the perceived risk of theft and vandalism. Some common security features for self-storage facilities include:

Controlled Access: This may include gated access, keypad or keycard entry systems, and on-site security personnel.

Surveillance Cameras: This may include both interior and exterior cameras, which can be monitored remotely or recorded for later review.

Lighting: This may include well-lit aisles and areas around the facility, and motion-activated lighting in certain areas.

Alarm Systems: This may include alarm systems that are connected to an alarm-monitoring company or the local police department.

Locks: This may include individual locks for each storage unit, or master locks that allow access to multiple units.

Fences: This may include perimeter fencing around the facility, as well as individual fencing around individual units.

Management Presence: This may include on-site management or staff members who are available during business hours, or who live on the premises.

It is important for self-storage facilities to have a comprehensive security plan in place, and to regularly review and update this plan as necessary. The specific security features that are required will depend on the location and size of the facility, as well as the specific risks that are faced. In addition, facilities should educate their tenants about the importance of securing their units, and should provide information about recommended locks and other security measures.

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.

What sort of fees do self storage syndicators collect?

Self-storage syndicators typically collect the following fees:

Acquisition fee: A fee charged by the syndicator at the time of acquisition, usually a percentage of the total acquisition cost.

Property management fee: A fee for managing the day-to-day operations of the self-storage facility, typically a percentage of the monthly revenue.

Asset management fee: A fee for overseeing the overall performance of the investment, typically a percentage of the monthly revenue or net operating income.

Development fee: A fee for overseeing the construction and development of a new self-storage facility, usually a percentage of the total development cost.

Disposition fee: A fee charged by the syndicator at the time of sale of the facility, usually a percentage of the sale price.

Performance fee: A fee based on the performance of the investment, usually a percentage of the returns generated by the investment.

Capital calls: A fee charged to the investors to cover unexpected expenses or to provide additional funds for the operation of the self-storage facility.

It's important to note that the fees and their structure vary from syndicator to syndicator and from investment to investment, so it's important to carefully review and understand the terms and fees associated with any self-storage investment opportunity.

What is the difference between a limited partner (LP) and a general partner (GP) in real estate syndications?

In a real estate syndication, the limited partner (LP) and the general partner (GP) are two distinct roles that are critical to the structure and operation of the investment.

Limited Partner (LP): The limited partner is an investor in the syndication who provides capital to the investment. They have limited liability, meaning they are only responsible for the amount they invested and are not responsible for the day-to-day operations of the investment. They receive a share of the profits and distributions, but they do not have a say in the decision-making or management of the investment.

General Partner (GP): The general partner is responsible for the day-to-day management and operation of the investment. They have unlimited liability, meaning they are responsible for any debts or obligations incurred by the investment. They are also entitled to receive a portion of the profits and distributions, but their primary role is to manage the investment and make decisions on behalf of the limited partners.

In a typical real estate syndication, the GP is usually a professional real estate developer or management company that has the expertise and experience to manage the investment effectively. The LP is usually made up of individual investors who want to invest in real estate but do not have the expertise or experience to manage the investment themselves. The GP and LP work together to achieve the investment goals and maximize returns for the limited partners.

What is the difference between Reg D 506(b) and 506(c) syndications?

Reg D 506(b) and Reg D 506(c) are two different exemptions from SEC registration requirements for private offerings. The main difference between the two is the method of marketing and advertising the investment to potential investors.

Reg D 506(b): Reg D 506(b) allows companies to offer and sell securities to an unlimited number of accredited investors and up to 35 non-accredited investors, but with some restrictions on advertising and general solicitation. In other words, under 506(b), companies cannot use publicly accessible means (e.g. advertisements, public websites) to advertise their investment offerings, but they can approach potential investors through personal and other non-public means.

Reg D 506(c): Reg D 506(c) allows companies to engage in general solicitation and advertising of their investment offerings, but requires that all investors be accredited. In other words, companies can use publicly accessible means to advertise their investment offerings, but they must take reasonable steps to verify that all investors are accredited before accepting their investment.

In general, Reg D 506(c) is considered a more flexible option for companies looking to raise capital, as it allows for a wider range of potential investors and greater marketing and advertising flexibility. However, the requirement to verify that all investors are accredited can add additional administrative costs and responsibilities to the investment process.

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.