🔒Self-storage property sales have slowed dramatically following pandemic-inspired surge in activity

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A little more than two years after Talcott Mountain Self Storage opened in Simsbury, about 55% of the facility’s 478 units are leased.

David Richman, who owns the property with partner David Burr, said two nearby apartment developments under construction along Route 10 have bolstered demand, but the self-storage industry in general is struggling with a lack of people moving due to low housing inventory and sales.

“There is a definite correlation to the real estate market,” Richman said of the self-storage sector. “You need homes to sell. You need activity. You need volume.”

That hasn’t stopped would-be property investors from calling Richman every week, he said. But he’s not interested in selling anytime soon, partly because he doesn’t want to be penalized for paying off his mortgage early.

Self-storage property sales have slowed dramatically over the past few years as demand for rentals has cooled following a post-pandemic surge in activity. Experts say there are still plenty of buyers, but they are being more selective.

Fewer deals

Nathan Coe, senior managing director of investments with the Hatcher Coe Group of Marcus & Millichap, said the overall market for self-storage property sales is better than pre-pandemic years, but has fallen from dramatic highs experienced in 2021 and 2022.

The use of self-storage rentals soared following the onset of the pandemic, which prompted many people to move, or clean out their homes to make additional room. High occupancy rates and low borrowing costs spurred eager investors to grow their self-storage portfolios, making it hard for even reluctant owners to turn away deals, Coe said.

Today, there are still plenty of interested buyers, but they are more cautious given lower rental demand and a big jump in borrowing costs, Coe said. Sale prices have moderated, and self-storage owners have less incentive to put their properties on the market, he said.

Nationally, Marcus & Millichap brokered the sale of 185 self-storage properties in 2019, and 170 in 2020. That shot up to a peak of 529 deals in 2022, before cooling to 228 sales in 2023, and 178 in 2024.

Coe said Florida and other Sunbelt states with rapidly growing populations saw a boom in self-storage facility construction, which has driven up vacancies amid lower demand.

New England has been “insulated a little bit” from the construction boom, Coe said, because of the region’s more expensive and scarce land, and tougher zoning restrictions.

Despite the tougher conditions, deals in Connecticut are still being done.

Cleveland-based Compass Self Storage, in January, paid $14.56 million for the 796-unit former All-Star self-storage facility in Torrington, at 260 and 300 Technology Park Drive. That follows the company’s $8.6 million purchase of a 350-unit All-Star location in New Hartford last September.

Compass is a member of the Amsdell family of companies, which has owned and operated more than 500 storage centers under various trade names in more than 25 states.

Compass Vice President of Operations Edward Hainrihar Jr. said his company would be happy to pick up additional assets in Connecticut. Compass is always on the lookout for good purchases, but has slowed its buying pace, he said.

The company looks at 10 to 20 properties a week that it won’t buy because prices are too high compared to income potential, Hainrihar said.

Prices, however, are moderating. He said he would have expected to pay more for the Torrington facility three years ago.

“Now, the prices are a little more inline, but we are still being selective because demand is down,” Hainrihar said.

Storage demand started weakening in 2023 and dropped off heavily in 2024, Hainrihar said. To counter that trend, Compass is trying to make its offerings more attractive, with added amenities like tighter security, late-night access and acceptance of package deliveries brought to individual units.

“Demand is still down, but we are continuing to pivot,” Hainrihar said. “Eventually, it’s going to increase. Life still goes on.”

Jennifer Barroqueiro, a vice president of the board of directors for the New England Self Storage Association, said 2024 was “the most challenging” year she’s seen in her seven years in the industry.

“It felt more challenging because we were coming off a high,” Barroqueiro said. “Really, the demand was just going back to pre-pandemic levels.”

With lower demand came lower rental prices, said Barroqueiro, who is also vice president of operations for Brooklyn, New York-based third-party self-storage operator White Label Storage, which oversees around 130 facilities in 28 states and Canada.

Rent on a standard 5-foot by 5-foot container has dropped to $45 or $50 per month in some markets, from a high of $85 to $100 a month during peak demand amid the pandemic, she said.

Today, operators need to maintain well-lit and visible properties, with strong marketing, including up-to-date websites to appeal to younger users, while also offering direct-dial customer service for older users, Barroqueiro said. In high-competition markets, operators may need to offer low introductory rates that are below costs to secure future revenue, she said.

“We are definitely not able to charge what we charged during the pandemic, even though inflation is up, because there are obviously more self-storage facilities now, because people built during that time since demand was high,” Barroqueiro said. “There is just more competition, so you have to be really on top of what you are doing with street (introductory) rates and promotions.”