Why is construction financing harder than it looks?

Building self storage is simple to describe and hard to finance.

The 2026 Self Storage Almanac cites Yardi projections that new deliveries decline from nearly 57 million NRSF in 2025 to about 46 million in 2026 and roughly 42 million in 2027. It also notes that oversupply in some markets, rent volatility, and tighter credit have made construction financing harder. Lenders are scrutinizing sponsors, feasibility studies, budgets, rents, competition, absorption, and stabilization timing. Many construction loans are lower-leverage, floating-rate structures. A strong site is not enough. The sponsor must prove the project can lease, refinance, and survive rate volatility. We used to get construction loans at around 85% leverage. Now we are seeing 65% leverage on the high end for construction financing.