Following a period of explosive growth at the start of this decade, self-storage investment and development activity has been somewhat frozen these past few years in the face of climbing interest rates. However, signs indicate that a thaw may be underway.

There’s evidence that a new industry cycle has begun, according to recent research from Marcus & Millichap, a commercial real estate investment firm with offices throughout Canada and the U.S. The company’s data reveals: 

To understand how these market forces are reshaping self-storage investment activity, it’s essential to examine what’s happening at the sector level. This article explores trends across three key areas—acquisitions, development and lending—and offers an outlook for each.

Acquisitions: Cautious Optimism

Self-storage acquisitions are experiencing a cautious but promising recovery after years of subdued activity, with industry professionals reporting renewed optimism as fundamentals recover. This potential bounce-back follows a dramatic correction that saw asset values decline 25% from their 2022 peak, according to the “Self-Storage Sector Update” published by Green Street, a provider of commercial real estate analytics and intelligence. Only offices, at 38%, saw a greater decline among commercial asset classes.

Related:Self-Storage Real Estate Acquisitions and Sales: January 2026

“In 2025, we’re experiencing an uptick in transaction volume and expect to close this year with an increase of 15% year-over-year in one-off transactions and a 65% increase overall after the closing of one large portfolio,” says Rick Schontz, CEO of City Line Capital, a real estate investment firm with a portfolio of more than 320 self-storage properties in 32 states.

Today’s self-storage acquisition environment reflects a shift toward quality over quantity. Schontz notes that investors are demonstrating “higher demand for properties that are recently built and well-located with a make-up of predominately climate-controlled units.”

James McLean, head of business development for Union Realtime LLC, which offers a suite of location-intelligence tools for self-storage and other real estate sectors, identifies significant opportunities in operational improvements. “Value-adds through operational efficiency will likely be the most common type of acquisition,” he says. McLean specifically targets single-story, drive-up facilities in secondary suburban markets, where the operational gap between small to mid-size operators present substantial upside.

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Regional dynamics are reshaping buyer activity. Schontz reports that “The Sun Belt markets with projected population growth and infill markets have been more active.” This geographic focus aligns with broader demographic trends and reflects investors’ preference for markets with sustainable demand drivers.

“We’re seeing the most consistent deal flow in high-growth markets where new supply has been relatively tempered, such as dense coastal markets, core California markets, mid-Atlantic and the Pacific Northwest,” says Tom de Jong, executive vice president of the de Jong Self-Storage Group for Colliers International, which has closed more than $2 billion in transactions. “We’ve seen deals in markets like Phoenix and parts of Las Vegas and Austin that got hit with heavy deliveries between 2022 and 2024 trade for at, or even below, replacement cost.”

The self-storage buyer pool is changing. As McLean says, “Institutional money will be the primary driver while industry tourists exit the space,” creating a more sophisticated buyer base. The real estate investment trusts (REITs) are making selective one-off acquisitions in markets with existing properties to leverage synergies, while private buyers and 1031 exchanges dominate single-asset trades under $10 million, according to de Jong. They primarily comprise class-B and -C infill properties and conversions in the Upper Midwest and Northeast, where the development pipeline is thin and cash flow is stable and reliable.

Related:Self-Storage Real Estate Acquisitions and Sales: December 2025

The real estate market has become increasingly split into two groups, Schontz explains. Investors who are more focused on long-term holds and/or core markets have been more active, while value-add funds seeking high yield have been less active due to the slowdown in revenue growth and high interest rates, he says.

The relationship between housing activity and self-storage demand remains critical. According to online real estate marketplace Point2Homes, only 11% of Americans moved in 2024, down from 14.3% a decade ago and far below the 20% that was seen during the 1960s. However, improving housing conditions driven by lower interest rates are expected to boost demand.

Sluggish home sales over the last two years flattened self-storage rents, Schontz notes. This trend coincided with an extended oversupply period, combined with economic pressures, which created what McLean characterizes as “a pretty big buying opportunity” for investors with operational expertise and patient capital demands.

Financing constraints are driving smaller transactions vs. portfolio sales. However,Schontz anticipates this will reverse as market conditions improve and larger deals return.

“Right now, the issue is that self-storage is very difficult to underwrite because of the nature of month-to-month rentals and rental rates don’t make sense,” says Cory Sylvester, principal at DXD Capital, a self-storage development and investment company that has raised more than $260 million for its funds. “How do you justify sourcing the debt for an acquisition if the upside doesn’t look that promising?”

Looking ahead, self-storage leaders express cautious optimism regarding acquisitions. Schontz maintains a bullish long-term perspective. “I don’t expect revenue growth to reach post-pandemic levels, but I do expect market normalization,” he says. McLean anticipates that improving demand will drive more purchases as self-storage investors can confidently deploy capital. Both agree that well-capitalized groups might crush it over the next four years as fundamentals continue to improve.

Development: A Much-Needed Breather

Industry building activity has hit the brakes—hard. According to the “Q2 2025 Self Storage Market Update” by commercial real estate advisory firm Newmark Group Inc., the development pipeline shows projected completions dropping to just 400 facilities in 2025 before gradually recovering to around 650 facilities in 2026 and more than 1,000 by 2027-28. “I don’t think development makes sense right now,” Sylvester says. “We’re at a much-needed supply slowdown.”

Many self-storage markets became oversupplied during the recent construction surge, and rental rates suffered as a result. Until these new facilities achieve healthy occupancy levels, adding more supply would only exacerbate the problem.

Here are some other trends impacting self-storage development at the start of 2026:

The cost of capital. DXD Capital’s “2025 Commercial Real Estate Lender Survey” shows that construction costs concern 41.2% of lenders, while developers struggle to underwrite achievable rates due to pricing strategies by self-storage REITs, including dynamic rate adjustments and aggressive move-in discounting, making it difficult to determine true market rent.

While many expect interest-rate cuts to stimulate development activity, some industry veterans aren’t optimistic about an immediate rebound. Even with cheaper capital, the fundamental supply-demand imbalance needs time to correct itself.

“Lower rates will make development more affordable and compelling, creating motivation for developers to put shovels in the ground again,” says Shawn Hill, principal for Chicago-based The BSC Group, which arranges debt and equity financing for commercial real estate investments nationwide. “As an industry, we need to proceed with caution when it comes to development. Excessive new supply often has a negative impact on market fundamentals like rent and occupancy.”

A focus on conversions. The building slowdown has created interesting market dynamics. When construction does occur, self-storage developers are favoring smaller, more capital-efficient projects with faster lease-up potential. In some cases, a conversion approach helps temper timeline and costs.  

“Conversions and infill projects continue to lead our development strategy,” adds Wayde Elliot, founder of StoreIt, which has a portfolio valued at more than $50 million. “Conversions are often the best option because they have lower construction costs and faster timelines. Developers are also becoming more creative by reusing retail and industrial properties for storage.”

The housing market. As with acquisitions, the self-storage development outlook is closely tied to housing-market recovery. As residential transactions normalize and people begin moving again, it should provide clearer signals about which markets are experiencing genuine population growth vs. speculative demand.

“As we see a healthier housing market and homes begin to transact, we’ll understand which markets are seeing population growth for the right reasons—long-term reasons, like steady job growth,” Sylvester notes.

A fresh start. Self-storage development is in a healthy reset phase, learning from recent oversupply while repositioning for sustainable growth. Stabilizing prices on construction materials will also help new projects come to fruition, while stricter regulations from municipalities will naturally control supply growth.

“Looking long term, the next few years look strong for self-storage,” Elliot says. “As rates begin to come down, development will increase—but not too quickly since zoning restrictions and construction costs will keep supply limited. Technology and remote management will continue to shape operations, and customers will expect more in terms of convenience, cleanliness and safety.”

Financing: A Better Lending Landscape

Lender interest. The self-storage lending environment experienced a notable transformation throughout 2025, with declining interest rates later in the year creating more favorable conditions for borrowers. After a period of elevated financing costs that limited activity, lenders report an increased appetite for approving loans as debt service-coverage ratios improve and loan-to-value requirements stabilize.

DXD’s survey showed that 94.1% of lenders maintained a desire to fund self-storage investments vs. last year, with only 5.9% expressing a decreased interest. This stability reflects the sector’s appeal.

“There’s no credit crunch. It’s just a matter of everybody fighting to get the money out the door and knowing what they need to do to win business,” says David Smyle, vice president for Pacific Southwest Realty Services, which annually provides $1.5 billion in financing on commercial properties.

Acquisition financing leads self-storage lending activity, with 94.1% of surveyed lenders actively targeting this segment, followed closely by ground-up construction at 88.2%. Refinancing represents 70.6% of current lending focus, while bridge and transitional loans account for 35.3% of lender interest. Bridge lending has gained traction among experienced operators targeting value-add opportunities.

Borrowing activity. “Debt has gotten steadily cheaper as the year has progressed, which has helped spur all types of borrowing activity including acquisition, refinance and construction,” Hill says. “Many borrowers who have been on the sidelines for the past couple of years are now finding the debt terms to be more compelling.”

Andover Lending is seeing demand across the spectrum, with loan requests ranging from $5 million to $200 million, according to Ian Ritchey, vice president of acquisitions for Andover Properties LLC, which also operates the Storage King USA brand. “In recent months, we’ve seen renewed demand for portfolio financing of scale, likely as a function of the declining rate environment we’re in once again.”

Loan performance. Among self-storage operators, loan performance has remained relatively stable, with 47.1% of lenders who participated in DXD’s survey reporting that the industry has performed on par with other commercial real estate sectors. Only 23.5% noted underperformance. Additionally, 70.8% haven’t restructured or extended self-storage loans in the past 12 months, indicating portfolio stability. However, absorption risk during lease-up tops lender concerns at 88.2%, followed by oversupply at 58.8% and sponsor capabilities at 47.1%. 

“What used to lease up in 18 months now it takes more like 24 to 36 months to stabilize,” Smyle explains.

This caution reflects market realities, as high-growth markets like Atlanta, Dallas, Houston and Phoenix—which Newmark identifies as leading in both population and supply expansion—burn off a glut of new self-storage supply and return to balanced market demand.

Borrowing costs. Lenders indicate that while underwriting standards haven’t necessarily loosened, borrowing costs declined throughout 2025, encouraging self-storage investors and owners who were waiting on the sidelines to re-enter the market. “Unless something dramatically changes in how the economy is trending, the market fully expects there will be additional rates cuts as we close out 2025 and move into the first half of next year, which will further lower borrowing costs and stimulate transaction activity,” Hill says.

What Comes Next? 

The self-storage industry is entering what appears to be a more favorable investment cycle. After working through supply challenges and market adjustments, several conditions are aligning to support a recovery. While some challenges remain, indicators suggest a more stable business environment and balanced growth ahead. We could soon experience the kind of robust transaction activity the sector hasn’t seen for a few years.

“The market is still adjusting to a lower-rent, higher interest-rate environment, but with pent-up demand to sell growing, we anticipate deal volume to accelerate over the next six to 12 months,” de Jong says. “Long term—meaning over the next one to three years—fundamentals should normalize as construction slows and demand stays steady. Lower interest rates will support more refinancing activity, and we’ll probably see renewed merchant-build activity, though pipelines will be more disciplined than in 2018 through 2022.”

Ron Matejko is the associate editor for Inside Self-Storage. To reach him, email [email protected].