Hey there,
I’m excited—and honestly, a bit relieved—to finally get my State of the Union update out to you. It’s been a long time coming. The last time I gave what I’d call a full “State of the Union” address for the storage industry was back in late 2021/early 2022. At the time, we were deep in what I was calling the “self storage bubble.”
Since then, a lot has changed. Some of what we predicted played out exactly as expected. Other aspects… not so much. That’s the nature of forecasting in a rapidly shifting economic landscape. But more than anything, we’ve had the opportunity to collect real data, real feedback, and real results. And now, I finally feel confident enough to share a clear, honest perspective on where we stand—and where we’re heading.
This newsletter is long. I won’t apologize for that, because if you’re investing in, operating, or even just watching this industry, you deserve depth over headlines. Let’s dig in.
Remembering the "Bubble" Talk
Nearly four years ago, I made a statement that felt bold at the time: we were witnessing the inflation of a “storage bubble.”
What did I mean by that? It wasn’t just about rising prices or booming demand. It was about unsustainable expectations. We saw an influx of new investors, many of whom didn’t understand the operational nuances of self storage. Facilities were being purchased at ultra-low cap rates. Debt was cheap and easy. Everyone was bullish—and when everyone is bullish, that’s when I start to worry.
I called this the "adolescent phase” - people were just learning about the potential of self storage (they used to laugh at it), and then everyone wanted in. You can see self storage begin to “grow up” in the mid- to late- 2010’s, when there were mass valuation changes that have very little to do with the core industry itself.
You can also see this with the massive growth in self storage construction in that same time frame I mentioned above - the mid- to late-2010s. The industry literally put out double the development we had ever seen over time.
We also saw occupancy soaring to over 90% - something the industry had never seen before.
My concern I had back then was simple: what happens when the music stops? What happens when interest rates go up, when demand cools, or when competition saturates the market?
Well, we didn’t have to wait too long to find out.
The Correction Has Arrived
Fast forward to today, and it’s clear: the correction is here. It’s not apocalyptic, but it is significant.
We’ve seen cap rates expand. That means valuations are coming down. If you bought a facility at a 4-cap in 2021 and you need to sell today, you're looking at a much less favorable exit—especially with interest rates sitting where they are.
Revenue growth has slowed. Occupancy is still decent across many markets, but the pandemic-era surge in demand has normalized. The customers that flooded into storage during COVID—people moving, downsizing, or running e-commerce businesses from their garages—have largely stabilized.
Meanwhile, the development pipeline didn’t slow down fast enough. So in some regions, we’re now seeing supply outpace demand, particularly in fast-growth Sun Belt markets that everyone was rushing into two years ago.
This is the natural ebb and flow of real estate, but it’s a gut-check moment for the industry. And it’s separating the operators from the speculators.
What the Data Is Telling Us
We spent months compiling and analyzing industry data, and I want to walk you through some of the major trends that stood out.
1. Cap Rate Expansion
Cap rates have risen by 100 to 150 basis points in many markets. That’s a big deal. It means a property that sold for $10 million at a 4-cap might now only command $8 million—or less—at a 5.5-cap, assuming no change in net operating income. This affects everything from refinancing to portfolio valuations.
2. Interest Rates Are a Wall
The Fed’s tightening cycle has dramatically reshaped the lending landscape. Two years ago, you could finance at 3.5% or 4%. Today, we’re seeing debt in the 6.5% to 8% range, depending on the lender and deal structure. That’s a massive shift in monthly payments—and it’s killing deals that would have penciled easily just 18 months ago.
3. Operating Performance Divergence
Good operators are still growing revenue. We’re seeing facilities with robust marketing, dynamic pricing, and strong systems outperforming their peers by a wide margin. But lazy operators? They’re losing ground. This environment punishes inefficiency and rewards execution.
4. Supply Is Not Uniform
Not all markets are overbuilt—but many are. Places like Phoenix, Dallas, and parts of Florida saw massive waves of development. Now, new supply is weighing on rental rates. In contrast, underserved secondary and tertiary markets are holding strong and even growing.
From Easy Money to Operational Excellence
This is the core message I want to hammer home: we are no longer in an environment where you can rely on macro tailwinds to carry you to profitability.
From 2018 to 2021, a lot of folks made money in self storage simply because they showed up. They bought a facility, did minimal improvements, and rode the wave of low interest rates and high demand. That era is over.
Today, operational excellence is the differentiator. If you’re not actively using online leasing, managing rates, optimizing unit mix, driving traffic through digital channels, and leveraging automation—then you’re falling behind.
This is especially true for smaller owners who bought during the boom. If you’ve got floating-rate debt, you’re likely feeling the pressure. Many are now facing refinancing in a completely different lending environment, and their margins have evaporated.
That’s not to say the industry isn’t still full of opportunity. It is. But the margin for error has shrunk considerably.
The New Rules of Engagement
Let’s talk about how to win in this new environment.
1. Underwriting Discipline
First and foremost, your underwriting needs to reflect today’s realities—not yesterday’s optimism. That means stress-testing deals at higher cap rates and interest rates. It means being conservative on revenue projections. And yes, it means walking away from deals that don’t pencil.
2. Capital Stack Matters
Equity, preferred equity, mezzanine debt—these all need to be scrutinized. Are you overleveraged? Are your investors aligned with the timeline and risk profile of the project? If not, you’re playing with fire. Today’s winners will be the ones with patient capital and flexible debt structures.
3. Technology is Not Optional
Automation, online rentals, dynamic pricing, call centers—these are no longer “nice-to-haves.” They’re table stakes. We’re investing heavily in our tech stack because it improves margins, scalability, and the customer experience.
4. Get Local or Go Niche
Blanket strategies don’t work anymore. You have to know your market down to the zip code. What’s the demand driver? Who are the tenants? What are the comps doing? We’re also seeing interesting success in niche strategies—RV storage, boat storage, climate-controlled micro-units. Get creative, but stay grounded in the data.
A Word to Investors
If you’re an LP or passive investor, this is the time to get serious about vetting your sponsors. Ask about their underwriting assumptions. Ask how they’re managing rising expenses. Ask if they have experience navigating downturns.
Deals that “looked good on paper” in 2021 may not even cover debt service today. And that disconnect isn’t always obvious in a flashy pitch deck.
Transparency, discipline, and a proven track record matter more than ever.
Final Thoughts: Still Bullish, But Smarter
Despite all of this, I remain bullish on self storage. We’re not in a collapse—we’re in a correction. That’s an important distinction.
The long-term fundamentals are still strong. People will continue to move, downsize, run small businesses, and need space. The demand is real. But the days of easy money are behind us, and that’s actually a good thing. It clears out the noise. It makes room for professional operators to thrive.
My team and I are staying the course. We’re buying—but carefully. We’re developing—but only where the data supports it. And most importantly, we’re improving every single aspect of our operations, day by day.
If you’re in this business for the long haul, now is the time to sharpen your edge. Focus on fundamentals. Build your moat. Stay disciplined. And if you do that, the next five years could be incredibly rewarding.
Thanks for sticking with me through this update. If you made it this far, you’re exactly the kind of person who will thrive in the market ahead.
If you want to watch my full State of the Union presentation (1.5 hours!), you can do so here. We had so many people on the webinar it actually tapped out our Zoom account - I wanted to make sure you had this recording in case that was you! There are some incredible updates shared during the presentation.
Until next time,
A.J.
