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The self-storage sector is navigating a softer demand backdrop while still demonstrating durable performance, according to DXD Capital’s Quarterly Self-Storage report. Industry commentators note that demand has cooled as the housing market remains gridlocked, contributing to a pullback in occupancy to roughly 92% in some recent data. Even as mortgage rates moved lower in 2025, a wide gap between buyer and seller expectations limited transaction activity and reduced relocation-driven self-storage usage.
DXD Capital’s capital principal and fund manager, Drew Dolan, told Connect CRE that the sector’s overall resilience remains notable given these headwinds. He pointed to national occupancy holding around 93% alongside modest positive rent growth as indicators that underlying fundamentals are intact. In his view, this combination underscores that the sector continues to perform despite a more challenging macro and housing environment.
The report observed a shift in pricing strategy as achieved rental rates began to exceed in-store rates in late 2025, suggesting that operators were prioritizing occupancy over rapid rate expansion. Major self-storage platforms cut in-store pricing during the winter season to support lease-up, a move the report characterized as potentially strategic rather than purely defensive. The focus on attracting and retaining tenants during slower periods reflects an effort to protect occupancy and revenue over the full year.
Dolan highlighted that seasonality plays a meaningful role in self-storage demand patterns. Planned moves are heavily concentrated in the summer months, driven by school calendars and more favorable weather, creating a short-term spike in storage needs. As colder weather arrives, that surge fades and the customer mix shifts toward tenants seeking longer-term storage solutions. Dolan noted that these cold-weather renters typically have longer stays, and they make up a larger share of new leases in that part of the cycle.
On the supply side, the report emphasized that the development surge of 2020 and 2021 produced oversupply in certain locales, but that condition is now easing. Citing Yardi Matrix data, the report said that new construction starts are declining, with 59 million square feet of new self-storage space delivered in 2025, down from a 2020 peak of 79.2 million square feet. Yardi Matrix also projects further moderation in deliveries over the coming years, pointing to a continued pullback in the construction pipeline.
However, Dolan cautioned that national statistics can obscure the hyperlocal dynamics that drive performance. He observed that outcomes are effectively determined within a three-mile radius of any given facility, and DXD Capital’s strategy centers on identifying submarkets that remain underserved even if the broader metro appears saturated. He framed the current slowdown in construction not as a concern, but as the early phase of the next development cycle for the sector.
DXD Capital’s outlook for the balance of the year calls for stabilization and modest growth, primarily supported by tightening new supply. The firm expects industry-wide rent gains in the 2% to 4% range, while noting that well-located properties in low-supply submarkets could outperform and assets in more heavily built-out areas could experience flat or negative rent trends. Demographic shifts are expected to remain a key driver of long-term demand, with higher housing costs contributing to smaller living spaces and greater reliance on storage.
Dolan cited usage patterns as one example of this demographic effect, noting that 19% of Millennials use self-storage, compared with 5% of Baby Boomers. He added that as Gen Z moves further into prime renting and homebuying years, their utilization of self-storage is expected to be even higher. That trajectory, combined with moderating new supply after the 2020–2021 boom, underpins the view that self-storage demand has a durable, multi-decade runway despite short-term swings tied to the housing market.
The post Self-Storage Fundamentals Stay Strong as Demand Softens and Supply Pipeline Pulls Back appeared first on CRE Market Beat.
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