Self-storage development activity has continued to slow and is expected to drop to 2% of inventory by 2027 and 1.5% of inventory through 2030. This is according to Yardi Matrix’s latest self-storage report and forecast.
Full-year construction starts are on pace to contract by 20% compared to 2023, and the deceleration in starts has begun to show up in the under-construction pipeline, which contracted by 1.8% during the fourth quarter, according to Yardi Matrix. On an annual basis, the under-construction pipeline has declined by 6.7% after peaking in December 2023, and Yardi Matrix said most of the current under-construction pipeline will be completed this year or by early 2026.
Days in construction peaked in mid-year 2023 and decelerated through mid-year 2024, the firm said. During the second half of 2024, average completion times began to trend back up. Projects completed during the fourth quarter spent an average of 413 days under construction. As such, the under-construction inventory most likely to be completed this year started between the fourth quarter of 2023 and the third quarter of 2024. Year-over-year advertised rental rate growth remains negative in most markets.
The planned self-storage pipeline was flat for most of 2024, a sign that self-storage new development interest has come off post-pandemic levels, said the report. The pipeline turned negative on a quarter-over-quarter basis only in December when it declined 1.8%, while year-over-year, the planned self-storage pipeline expanded by 4.4%.
Self-storage projects starting construction in Q4 spent an average of 583 days in the planning phase, reflecting a material increase in planning time during late 2022 and 2023 as self-storage development rapidly expanded. Material and labor constraints also have led to delays in starting construction, and financial constraints are now playing a role as well.
The prospective pipeline is continuing to contract, declining 10.2% quarter-over-quarter and 25.3% year-over-year. This decline follows an expanding prospective pipeline in 2022 and 2023 and suggests fewer sponsors are taking the time and effort to find suitable development sites and begin the process of obtaining development entitlements, according to the report.
The number of deferred and abandoned projects in the Yardi Matrix database moderated from mid-year 2024 highs but remains elevated. Deferred NRSF for markets open at least 24 months stood at 4.07 million at the close of Q4, a 2.5% decrease quarter-over-quarter and a 7.6% decrease year-over-year.