Self-storage has been a top-performing asset class for nearly two decades, driven by its unique operating model and resilient demand characteristics.
Despite a challenging two-year period marked by a sector-wide retracement following significant pandemic-era gains, we see the self-storage sector repositioning itself to be a potential bright spot in the coming years.
Self-storage investment returns have led all property types in annual returns five times since its inclusion in the National Council of Real Estate Investment Fiduciaries (NCREIF) index 19 years ago. Since 2006, it has delivered the highest average annual return of any property type, coming in at 11.6 percent.1
Low Correlation to GDP Fluctuations
Amid an ever-evolving investment landscape, alternative real estate sectors, such as self-storage, tend to behave differently than traditional real estate sectors (i.e. multifamily, office, industrial, retail). In fact, self-storage demand is generally driven by life events that disrupt household living situations, often referred to as the “Four Ds – death, divorce, downsizing, and displacement.” These types of demand drivers tend to have low correlations to the macroeconomic environment and are historically less sensitive to gross domestic product (GDP) fluctuations.
Historical Sensitivity to 1% GDP Change2
Inflation Hedge Characteristics
The inflation-hedging potential of real estate is often debated, hinging on whether income can outpace inflation. Self-storage stands out from other sectors, as leases are typically month-to-month, which allows operators to adjust rents frequently. This key feature is highlighted by net operating incomes (NOI) of self-storage properties, which have demonstrated an average annual growth of 4.4%, compared to a 2.5% inflation rate, since 2008. From 2008 through 2024, self-storage income has outpaced inflation by 190 basis points.3 This performance underscores the sector’s ability to achieve strong NOI growth during periods of economic uncertainty.
"Sticky" Tenants with Evolving Needs
Current motivations for renting a self-storage unit continue to evolve as reasons range from a lack of space at home, moving, downsizing, business-related needs, and home renovations. With the widespread use of autopay and the passive nature of stored goods, which are often items that don’t require regular attention, tenants are encouraged to stay longer. In fact, the length of stay for a self-storage tenant tends to average around 19 months,4 partially driven by the relatively low cost to rent a storage unit. As a percentage of income, people pay far less for storage unit rentals, with the national average per unit at $129 a month.5 Typically, self-storage tenants can more easily handle rent increases, as even a percentage increase results in a relatively small dollar amount. For example, even a $5 increase on the average of $129 monthly rent per unit rent results in rent growth of 3.9%.
Low Cap Ex & Operational Requirements
Self-storage facilities have one of the lowest capital expenditure requirements compared to other real estate sectors. A typical self-storage facility is built with concrete, steel, and a metal roof, which is far less complex to construct than an apartment or office building. As a percentage of NOI, capital expenditures for self-storage assets comes in at a mere 8.0% compared to other real estate sectors, which cost 13% or more.6
Additionally, self-storage facilities typically operate with lower overhead, often managed by a lean team that focuses on lead generation through targeted online marketing and search engine optimization. With a large share of tenants discovering units online, digital visibility plays a key role in driving operational efficiency.
Capital Expenditures as a % of NOI6
As the short-term tailwinds ease, we have seen the self-storage sector travel through a phase of normalization coming off peak demand years. The sector is demonstrating similar trends to its past self with strong long-term fundamentals. Demand drivers like the “Four Ds,” household formation, and remote work remain resilient, underpinned by demographic trends among prime-age consumers seeking flexibility, mobility, and space. With new supply tapering and occupancy rates poised to rebound, we believe the self-storage sector is well-positioned to resume its long-term growth potential.
Sources:
1 NCREIF Data Subscription.
2 Green Street. Navigating the “Upside Down” in Commercial Real Estate. September 15, 2022. Per Green Street, the historical sensitivity displayed reflects a 20-year period ending on or about 2020.
3 NCREIF Expanded NPI Rent Growth & FRED CPIAUCSL.
4 Storable. Self-Storage Industry Pulse. Q1 2025.
5 Green Street Data Subscription.
6 NCREIF Expanded NPI | Data since 2021
