Is Storage Demand Destruction on the Horizon?

THE SELF STORAGE REPORT — EPISODE TRANSCRIPT Episode: Is Storage Demand Destruction on the Horizon? Host: Chris Berg — Abernathey Development Recorded: April 1, 2026 Video: https://www.youtube.com/watch?v=SBptnxMd0vc Key topics: WTI crude above $100 and back below 100; food and gas prices squeezing lower-income storage customers; Ten Federal in San Antonio using average household income and ECRI to screen assets; Nick Gerli's Reventure data showing nearly 22% of mortgage holders now above 6%; KB Homes reporting a 10% decrease in home prices; California storage transactions averaging 91 a year but only 38 in 2024, tracking toward 70 to 90; Nick Walker of CBRE calling October 2024 the rental-rate low; 2025 census data showing LA County with the biggest population decline in the country, roughly 50,000; Wall Street Journal on Hollywood hiring at its lowest pace since 2011 and the AI video threat; storagedemandscore.com powered by Track IQ's API; a 75,000 net rentable square foot test at 10417 Hawthorne Boulevard in Inglewood scoring 2.6 within 3 miles; Mr. Cohn of the New York SSA requiring a 3.0 or better demand score; California Self Storage Association Peer Power Hour Thursday at 10:00 a.m. Note: Speaker attribution reconstructed from raw captions. Light cleanup of transcription errors only; wording preserved. Timestamps and YouTube chapter markers removed. Turns marked [attribution inferred] could not be attributed with certainty. ————————————————————————————— Chris Berg: Is storage demand destruction on the horizon? We're going to look at this from a couple of different angles today cuz there's some potentially good news in regards to storage demand based on some new data, but also if you're obviously watching the news, a lot of not-so-good news around storage demand. We'll get into that plus some interesting news as far as deals getting done in California, self-storage deals, and then LA. Like LA LA LA, we love you, but we got we got to get some things straight now in LA. Chris Berg: All right, let's dive into the not-so-good news about what's happening in regard to storage demand and potential storage demand destruction. This is just a quick chart to show you where WTI is now over $100. Um, does it stay there? Who knows? We're not going to get into geopolitics today, maybe we'll save that for another day. And yet President Trump said, "Hey, I may just end this war and let the straight-up kaboose be what it's going to be." Um, and that obviously is not going to be good news for the price of oil, but I think you have also you want to start to look at what that potentially could mean as far as the price of food as well. We all know when energy costs go up, food prices tend to follow. Chris Berg: I bring this up because I mentioned to you when I was in San Antonio from Ten Federal, one of the guys said there one of the most important things he's looking at now as they're looking at assets is what's the average household income in an area. And he does that a lot because of ECRI. So if you're in if you've got an asset right now that's in a lower income area and food prices are going up, gas prices are going up, that starts to squeeze that consumer's disposable income. And then potentially it could be a time where you've got people looking at uh hey, do I put food on the table or do I pay for my storage, right? So if you're in one of those income areas that simply you would definitely want to be paying attention to. Um, and if not, you know, we'll see how this thing plays out as far as oil and food prices. So that's the not-so-good news from a storage demand perspective. Chris Berg: Here's where a shift could be happening. We've been talking a lot about the reason that nobody is moving is because they're essentially stuck in their 3% mortgage rates. Well, Nick Gerli, if you follow him, he's got the Reventure app, does a really good job as far as housing and home prices. It says here with each passing day, the mortgage rate locking effect is fading. Now, you've got nearly 22% of the mortgage holders with a rate above 6%. Actually more than the people that are holding those 3% mortgage rates. So, this from a strictly just storage demand perspective potentially could be a positive trend. Chris Berg: We've seen housing prices starting to come down. I shared with you last Thursday when KB Homes had their earnings report. They said, "Hey, we've had a 10% decrease in the price of homes." So, you may start to see a little bit more movement. Hiring is down. I don't know if that means more people are going to be moving in with their parents or if that means, "Hey, people are actually going to start to feel better about the economy and, you know, make a big purchase for a home." We don't know. We're just going to see how that sort of bears out. Chris Berg: I also want to share with you this that I think is interesting. I had a great conversation with a broker in California yesterday. We're going to dive into some LA information here in a moment as well, but he talked about, you know, the average storage deals that are done in California per year. Typically, you see around 91. So, that's been the ongoing average of acquisitions and transactions that have taken place. He shared with me in 2024, and if you remember Nick Walker from CBRE suggested that hey, 2024 could be the low from a rental rates perspective. He suggested October of 2024, but this broker told me that in 2024, there were only 38 transactions in the great state of California. So, typically 91, 2024 38. He did say that we're on track this year to get back to around 70 or 90. Chris Berg: So, all I'm suggesting is that more and more people are either in a pinch, which we've seen, and you've got some guys that, you know, obviously went built and got their loans and let's say '21, '22 and now they see hey man I've got to got to refi. We see what's happening with the 10-year, the 2-year I said last week look for that Fed funds rate potentially to go up depending on where the 2-year is headed. So, just some ways to look at the chessboard and go okay, how is this thing going to get mapped out? But, good news is is we're going back towards that average of 91 transactions here in the great state of California for storage again in 2024. We were at 38. Chris Berg: I always go back to how many guys I've talked to that have been in the business for decades and they're like Chris, this is the worst it's been in 31 years. The other gentleman said this is the worst it's been in 20-some years. So, I say this because I look, I feel your pain if you're in this industry right now. It has been a challenge and so, there are some decent things that are beginning to crack, some crack in the soils if you will. Chris Berg: Now, all this could be a moot point if we end up at boots on the ground in Iran and oil's at, you know, 125 and food prices are going up and right now in the Philippines, you know, I've got a friend over there in the Philippines, there's an energy emergency over there. There's only X amount of days left in Australia diesel. So, that piece I want to bring up because if you remember when I was in the media back in the COVID days, you started to hear rumblings of things happening through Asia and it was like, it's the flu, not a big deal, it's never you remember the dialogue it was like, it's never coming to the states. We had some people in DC, you know, urging you to go to Chinatown in San Francisco and then we all remember what happened there. So, I say that because you just these could be some leading indicators you want to be paying attention to. Again, especially if you got assets that are in some of the lower income areas, you could see disposable income get squeezed and what is that going to look like from people either paying you for their storage or paying for food to put food on the table and gas in the car. Please just pay attention to that. Chris Berg: Okay, this this pains me cuz I live just outside of LA. Um and I think it's important to talk about. So, speaking about demand, we've mentioned before here on the show. Hopefully I've got this up for you so you can actually see it cuz sometimes I think I do and then I don't. Uh okay, good. You can see this. So, um we've talked before about the lack of immigration coming into the country, right? Now, if you're in North Dakota where I'm from, uh whatever. If there's you know, 2 more people less coming across the southern border, not a huge impact. But if you're in California, Texas, Arizona, Florida, you know, you've got 2 million people less coming across that border. Obviously, that's going to have an impact on the amount of people that are just in a community. Chris Berg: Well, the latest census data that came out recently for 2025 shows that LA County had the biggest population decline in the country. Now, LA's huge. It's not going to have a huge I mean, the numbers I think were like 50,000. So, it's not a detrimental impact, but it's something that you just want to keep your eye on again from just purely a storage demand perspective. Chris Berg: And I think what's interesting, I'm not saying this is a causation, but there's a really interesting correlation here. When you look at uh Wall Street Journal came out with this piece about the Hollywood job market. I mean, the hiring rate. You know, I'm I'm just going to put this here to kind of tie into what I want to get to with LA and and AI, but the pace of hiring just fell to the lowest level since 2011, obviously outside of what happened with the COVID situation. But because of AI, and you see potentially interest rates going up and things of that nature, um hiring is down dramatically. Chris Berg: And so, I say this from an Hollywood perspective that because of AI, and I was talking to a friend of mine here in LA that's big into Hollywood. I'm like, and I hate to be the bearer of bad news, but your gig is up. Your gig is up, my friend. When you see what's happening with AI video and trailers and what can be created now from just simply talking to your computer and boof, there pops out, you know, a 36 second or 2-minute video. I don't see this coming back. What they're going to do to bring Hollywood back unless there's a bunch of tax credits and different things of that nature. Potentially, that could take place. Chris Berg: Um but when you've got Hollywood hiring way down. I think the most intriguing part of the story is it opens up with a story about a a US congressperson um that was in an acupuncture session. And the acupuncturist is like, "Hey, man, you guys doing anything to bring back Hollywood? Are you doing anything to bring back entertainment jobs?" And what my point is is unless you live in LA, it's hard to appreciate the ripple effect of the lack of production activity in this city. So, it impacts, you know, you obviously you've got the above-the-line people that are called, the people that are in front of the camera, but it's really the below-the-line people, the grips and the acupuncturists and different people that make all this money because you've got the capital flowing. Money's fungible. Um so, you just want to pay attention to people obviously leaving LA. Hollywood is not doing well, and I share this cuz we've got the Super Bowl and the Olympics coming up. So, just be aware what's going on with your assets in Los Angeles. Chris Berg: Um with all that being said, we talk a lot here about storage demand. There's There's the business is simple. If you just keep it to supply and demand. Everyone's talking about supply. We've got inundated with supply because there was just such great returns uh if you were building storage or had a storage asset back during the COVID days. So, everyone was like, "Hey, piece of dirt, some metal, I can make money. Let's go do this thing." As many people are finding out, it's not that simple. Chris Berg: So, what I wanted to do and I'm hoping to do here is to to give you an actual formula, a metric around storage demand so you can feel good about really increasing the returns for your investors and ideally just giving yourself a more margin of safety. So, just go to storagedemandscore.com. Let's see if I can bring this up for you. But just go to storagedemandscore.com. We continue to make it better, simpler. It's to the point now where it's got the formula all laid out for you. I want to thank TrackIQ. They are providing the API information, which you're going to see here in a moment. Chris Berg: So, I'm like just give you a quick example of how simple now we've made this thing. So, I'll go into a site we're looking at in our pipeline. Let's see. 10417 uh Hawthorne Boulevard. That's Inglewood, California. Oh, this is an easy number 75,000. Hit this button. So, now you all you do is you put in an address, you put in the net rentable square feet of the project you're thinking about doing. Hit this blue button here. It's going to go It's actually going to give you uh what the potential rates are within 3 and 5 miles. And then you come down here and here's your score. And so, you can see within the 3 mile right now the score is 2.6. So, this is a maybe from a pure demand perspective. Chris Berg: Um if this is your first time joining me here on the show, I've talked about before this formula. A big part of it came from a gentleman that was at the New York SSA, uh Mr. Cohn. And he says, "Look, I need a 3 plus in my demand so this should be 3 or 3 points over greater to give me a greater margin of safety cuz I don't know what other person's going to come in and potentially add more supply once I put a shovel in the ground." So, he's looking for that margin of safety of a 3.0 or better. You can see here within a 5 mile clearly this site has got some legs from uh you know, a purely demand perspective. This is just one metric you want to utilize as you're going into uh your underwriting process to say, "Hey, do I have a demand buffer here so I know if my rates are good enough to underwrite, I can make it work from a construction perspective that hey, even if um you know, some more supply comes in, I'm going to be okay." Chris Berg: It's amazing. I'm watching my screen here. So, some good news, WTI now below 100 bucks. So, we'll see how this thing begins to uh and continues to play out. But, if you want to look at some of your assets and say, "Hey, what is the demand viability of an asset here?" Please do yourself a favor as you begin the underwriting process, you can go to storagedemandscore.com, storagedemandscore.com. We're making it super simple. Again, thanks to Track IQ, you just simply plug in an address, what the net net rentable square feet is, and boom, it's going to kick out that demand score for you. Chris Berg: Um also, if you're part of the California Self Storage Association, want to let you know on Thursday, um if you're not, I will be talking about what goes on in this meeting uh on probably Thursday afternoon on the show here, but if you are part of the California Self Storage Association, there's going to be a Peer Power Hour 10:00 a.m. this Thursday to 11:15. Great opportunity here from some people in the industry about what's happening currently. Chris Berg: And again, there is some potentially good news with um some cracks in the soil from an aspect that more transactions being done. I think the bid ask is getting closer. Um so, we'll see how things play out. There's so much obviously uncertainty in the world, but one of the things that you want to keep in mind and if you can't join this Peer Power Hour, um I will give you the skinny uh Thursday, probably sometime in the afternoon, maybe Friday morning. Chris Berg: Um but as always, please share this with your colleagues. I'm going to wrap it up here for now, but there's some potentially good news in regards to storage demand if you're just joining us, but also again, a lot of bad news as well. The oil prices continue to go up, food prices go up, you're going to see some of the disposal income squeezed on some of your customers, which may force them to make a decision on hey, am I going to put food on the table or pay for self storage. If you're seeing anything out there market, please leave some comments, let me know here and thank you so much for joining us. We'll see you back here soon on the self storage report. — END OF TRANSCRIPT —