The self-storage development pipeline continues to exhibit signs of a slowdown, according to the Q2 report from Yardi Matrix, which indicates construction starts declined in Q4 2023, while growth in both planned and prospective development moderated. The number of deferred and abandoned self-storage projects has been increasing. These circumstances are consistent with the previous quarter’s forecast expectations.
Self-Storage Supply Forecast Notes
Changes in Yardi Matrix self-storage development pipeline data in Q1 2024 were consistent with previous forecast expectations. The Q2 2024 forecast update is therefore relatively unchanged compared to the Q1 2024 update.
Near-Term Forecast: 2024 and 2025
The forecast for 2024 and 2025 is substantially unchanged. Despite a decline in construction starts to close out 2023, the under-construction pipeline was essentially flat in Q1 2024. Elevated completion times are most likely driving the current plateau. For markets tracked by Yardi Matrix on or before 2020, there are currently 59.6 million net rentable square feet under construction. This represents a 0.3% decline quarter-over-quarter and a 12.8% increase year-over-year.
For the first three quarters of 2023, construction starts were above 2022 levels, topping out at 16.7 million NRSF in Q3 2023. Construction starts declined to 13.9 million NRSF in Q4 2024. This is the first sizeable quarter-over-quarter decrease in new-construction starts since Q3 2022.
Yardi Matrix pipeline data is also showing a decline in the average number of properties moving from planned to under construction per month. Pre-pandemic, roughly 4.5% of planned pipeline properties moved to under construction per month. In Q1 2024, the average cycling level stood at 2.3%.
After declining in the second half of 2023, days in construction increased slightly in Q1 2024. Currently, Matrix has identified 110 self storage completions in Q1 2024. These properties on average spent 402 days (1.1 years) in construction. This is slightly above the trailing four-quarter average of 390 days.
Elevated construction completion times have contributed to the increase in the under-construction pipeline. In 2019 and 2020, approximately 10.0% of under-construction properties were completed per month. For Q1 2024, the average stood at 6.1%. Average Monthly Cycling Percent Under Construction Completed 2019 2020 2021 2022 2023 2024 Q1 10.1% 10.0% 8.5% 6.7% 7.9% 6.1%
Compared to the previous quarter, the Q2 2024 update is relatively unchanged for the years 2026 through 2029. Yardi Matrix continues to forecast new supply will decline to around 2.0% of inventory for 2026 and 2027, and further decline to 1.5% of inventory for 2028 and 2029. Several trends emerged in the second half of 2023 that suggested overall self storage development enthusiasm was declining and a reduction in the long-term forecast was appropriate. These trends continued into Q1 2024:
■ The number of deferred and abandoned self storage projects continues to increase.
■ Growth in the planned pipeline has moderated.
■ The prospective pipeline has contracted.
■ Street rates continue to decline.
■ Project sponsors are still reporting a difficult financing environment.
The planned pipeline currently contains 121.3 million NRSF. This represents an increase of 4.9% quarter-over-quarter and 16.0% year-over-year. The slowing rate at which planned projects move to under construction discussed previously is likely a driver in the recent planned pipeline expansion.
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Yardi® Matrix offers the industry’s most comprehensive market intelligence tool for investment professionals, equity investors, lenders and property managers who underwrite and manage investments in multifamily, student housing, industrial, office and self storage property types. We provide nationwide market and institutional research reports that leverage property-level details of multifamily properties. Yardi Matrix also uses data in the Yardi property management system stack to create aggregated and anonymized operating expense, revenue, and operational metric data that improves underwriting analysis and competitive benchmarking.
