Storage Turns The Corner

🏗 From The Ground Up

Real Estate Insights. Success Mindset. One Step at a Time. Issue #20 | September 3, 2025

🧠 Market Insights

Storage Turns The Corner

While everyone was focused on office doom and multifamily corrections, self-storage quietly stabilized.

Public Storage, the industry's big kahuna with 3,432 properties and 2 million customers in 40 states, increased its outlook for this year, citing a decline in deliveries and stabilizing demand. Same-store revenue up more than 4% in Tampa and Honolulu. Overall, Q2 revenue was up 1.7% year-over-year.

Here's what's driving the turnaround:

• Supply Pipeline Cooling: Properties totaling only 2.7% of the country's existing stock are under construction, a massive decline from the oversupply years
• Demand Stabilizing: Move-out activity has stabilized at pre-lockdown levels, and tenant retention improved with average length of stay increasing to 18.4 months
• The Multifamily Connection: The US added 4.1M apartments between 2015 and 2024, nearly 40% of all multifamily units delivered over the past 40 years. As renters prioritize location over size, newer apartments are up to 75 SF smaller

The Dirt Dawg Reality: Storage REITs are pulling back on new supply and focusing on stabilization. The sector's delinquency rate? A microscopic 0.28% compared to 7.24% for multifamily CMBS loans (Trepp's CRE Rundown). This isn't just recovery, it's reset positioning.

Texas Leading the Charge: Houston leads with 240K new apartments and 20M SF of storage. Austin, Dallas, and San Antonio each added tens of thousands of apartments, alongside millions of square feet of storage. Where apartments shrink, storage grows.

Year-End Reset: Deal Flow Finally Moving

After two years of price standoffs, the market's showing signs of life. Commercial real estate investment activity is expected to grow by 10% this year to $437 billion, and the bid-ask gap will continue to narrow as we see more transactional activity and market conditions steady.

Smart money is positioning now because they see what's coming:

• Sellers adjusting to reality (finally)
• Capital costs are stabilizing around current levels
• Permanent qualified opportunity zone incentives and expanded LIHTC programs, creating new funding sources

Bottom line: The pros aren't waiting for perfect conditions. They're creating clarity while others chase headlines.

✨ The Alpha Effect

"Shrink to Grow"

Here's the counterintuitive truth about today's market: The winners are getting smaller to get bigger.

Apartments are shrinking, 75 square feet smaller than early 2000s builds. But that's not a weakness. That's strategy. Renters prioritize location over size, and developers who understand this are capturing maximum value per square foot.

Storage operators get it too. They're not chasing new construction; they're optimizing existing inventory. Focusing on tenant retention instead of unit count. Quality over quantity.

This isn't about doing less. It's about doing what matters most.

The market rewards those who understand that growth doesn't always mean expansion. Sometimes it means concentration. Focus. Doing fewer things better.

Your land strategy should follow the same principle: Maximum impact, minimum footprint.

Stop chasing every opportunity. Start dominating the right ones.

🚀 One Step at a Time

Three Storage-Smart Moves Before Year-End

1. Audit Your Small-Space Potential: Identify 1-3 acre parcels perfect for storage development. California metros like LA and San Diego have strong multifamily growth, but storage development lags, especially in LA, where inventory sits at just 2 SF per capita (vs. the national 7). (CRE Daily)
2. Map the Apartment Boom: Overlay new multifamily developments in your market. Where apartments get smaller and denser, storage demand follows 12-18 months later. Sunbelt cities are seeing the strongest correlation.
3. Run the Conversion Numbers: Got an underperforming retail or light industrial asset? Storage conversions are hot. Lower construction costs, faster permitting, and the sector's 0.28% delinquency rate make it lender-friendly.

Small steps compound. The storage sector just proved that patience and positioning beat panic and prediction every time.

Here's to building your success, one step at a time— from the ground up. Kris "Dirt Dawg" McGee 🐾