Self-storage development continues to decelerate, with new supply expected to drop to 2% of total inventory by 2027 and further decline to 1.5% through 2030, according to Yardi Matrix’s latest self-storage report and forecast.

Construction starts are projected to contract by 20% in 2024 compared to the previous year. This slowdown is reflected in the under-construction pipeline, which shrank by 1.8% in the fourth quarter and has declined by 6.7% year-over-year since peaking in December 2023. Most projects currently under construction are anticipated to be completed by late 2025 or early 2026.

Construction timelines peaked in mid-2023 before slowing through mid-2024. However, in the latter half of 2024, project completion times began to increase again, with projects finalized in Q4 spending an average of 413 days under construction. Based on this trend, developments set to finish this year likely began between Q4 2023 and Q3 2024. Meanwhile, advertised rental rate growth remains negative in most markets.

The pipeline for planned self-storage projects remained stable throughout 2024, signaling that development interest has declined from post-pandemic highs. The pipeline turned negative quarter-over-quarter in December, contracting by 1.8%, though it still expanded by 4.4% year-over-year.

Self-storage projects that broke ground in Q4 spent an average of 583 days in the planning phase, reflecting increased planning durations in late 2022 and 2023 due to the rapid expansion of self-storage development. Delays have also been driven by material and labor shortages, while financial constraints are now adding further pressure.

The prospective development pipeline continues to shrink, declining 10.2% quarter-over-quarter and 25.3% year-over-year. This shift follows pipeline expansion in 2022 and 2023, indicating that fewer developers are pursuing new sites or working through the entitlement process.

While the number of deferred and abandoned projects has moderated from mid-2024 highs, it remains elevated. At the end of Q4, deferred net rentable square footage (NRSF) in markets open for at least 24 months stood at 4.07 million, marking a 2.5% quarterly decline and a 7.6% drop year-over-year.

Source:  GlobeSt.