Just Released: TractIQ 2Q Self-Storage REIT Report with Noah Starr

THE SELF STORAGE REPORT — EPISODE TRANSCRIPT Episode: Just Released: TractIQ 2Q Self-Storage REIT Report with Noah Starr Guest: Noah Starr — CEO, TractIQ Host: Chris Berg — Abernathey Development Recorded: September 11, 2025 Video: https://www.youtube.com/watch?v=_NCy-i6NY8E Key topics: REIT street rates versus achieved rates and the inversion that began in Q4 2023 into Q1 2024; the Q2 2025 reversal with street rates rising and achieved rates falling; street rates peaking near $27, dropping to $19 and now close to $18; web rates and discounted online pricing; California legislation requiring rate-schedule transparency; REIT same-store occupancy time series back to 2017; 2021 as the peak year at 95% in Q1 and close to 97% in Q2; 2025 as the lowest occupancy since 2017, in the 91-92% range; four of the five REITs posting negative year-over-year NOI for the first time since the GFC; self-storage adoption rising from 2% of the population in 1985 to 10% in 2025, possibly 12-13% per the SSA demand study; aggressive ECRI and customer experience; the 2020-2021 supply overbuild and the Newmark forward supply outlook for 2026-2029; 500-560 day average development timelines; 40-50% of developers in the last cycle being first-time developers; the Public Storage September fundamentals update. 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: Welcome to the CRE Report. I'm your host, Chris Berg. Joining us today, very special guest, Noah Starr, CEO of TractIQ. They just released their Q2 — this gonna be off today — Q2 self-storage REIT report. So, we want to give you the analysis there, what he is seeing as far as what the numbers are suggesting right now, what's happening within the industry. So, Noah, great to have you with us. Where would you like to start, my friend? Noah Starr: This is awesome. So glad to be with you. So great to see you last week in Vegas. Had a lot of fun and, yeah, excited to share some more great research. I would love to — I think we could start with page four. Yeah, I would love to dive into this first chart that you have up here and kind of walk through what's going on, and feel free to come in with any insights that you have too. But I think this chart is a really good summary of what self-storage operators and investors and brokers have faced in the last couple of years. So in this blue line we have the average REIT street rates over the last five years, and in the red we have the average REIT achieved rates. Okay. And throughout history in self-storage, there mostly was a premium that street rates had over achieved rates, right? And street rates again being the rate that you would get if you walked in off the street. And typically, if you were a longtime customer of storage, you were rewarded with lower prices, right? It was good to stay for a long period of time. And what ended up happening in 2023, 2024, when we had a slowdown in demand, housing started to fall, interest rates rose, all the standard data points that we've talked about for a long time. You saw this inversion happen where, okay, now street rates were actually lower than what customers were paying. And there's a lot of reasons why, especially, you know, operators moving to web rates, which are the discounted online rates, right? But all these factors culminated where now you're actually punished if you're a longtime customer in a storage facility. So, we saw that inversion happen in Q4 of 2023, heading into Q1 of 2024, and that delta actually grew quarter after quarter after quarter until this one. Right? So now we're finally seeing, Q2 2025, a pretty big move where street rates have started to increase and the achieved rate has actually started to fall. So really interesting data here. But a lot going on in just this one chart. Chris Berg: So I guess bottom line this for me. How do you translate this into what does this mean for people in the business, and what does this mean for customers? Noah Starr: I'll come to customers — I'll come to customers second. But what does this mean for people in the business? So, it's actually amazing if you look at this red line, right? Which are REIT achieved rates on average. Chris Berg: Just for people that aren't in the business, just explain achieved rates as well. Noah Starr: Yeah. Achieved rates are the actual average rental rates existing customers are paying on average. So you might move into a facility at $100, but after, you know, rental rate increases, you might actually be paying $130 for that unit size. So the achieved rates are the rates customers are actually paying on average. It's amazing that in a declining street rate environment like this that that red line did not fall off a cliff kind of like this. Like you can see this — street rates almost peaked at $27, came down to $19, now close to $18, but the achieved rate actually kept increasing until early 2024 before it started gradually declining. So I think ultimately, right, it's — in the long term I think impossible to have increasing achieved rates with declining — like eventually the math doesn't math. You'd have to increase rates so much to have that growth rate. So I think for investors and brokers, this to me — hopefully — I think an inversion in this case is bad for investors and brokers, where it's really hard to underwrite. People are looking at rental comps and trying to tell the lender, "Yes, I know the street rate says $100 for the 10x10, but look at the data, there's really a 10 or 20% premium that we could get on this unit when it stabilizes." So, I think that's bad for the industry, and moving in the other direction is a positive. For the customer, I also think it's a positive because if you think about — if the website price is $100, but in five months you're going to be paying $130, that's a bad outcome, right? Where your expectations maybe weren't met. You maybe feel like you were misled in a sense and you didn't have the full context as to what you'll actually be paying. So as we get away from an achieved rate premium, I think that's holistically better for everyone. Chris Berg: What do you — that's a pretty precipitous rise, you know, in Q — looks like Q1 to Q2. What do you make of that? Noah Starr: I think that's the combination of things. Number one, seasonality. Q2 tends to be the busy period in self-storage where you have the summer, you have students looking to move into units during the, you know, once the school year ends. You have a lot of factors of, you know, transaction activity kind of peaking in the summertimes, home sales, things like that. So I attribute that mostly to seasonality. I think there are some other factors going on where you saw in California in particular legislation coming out about storage operators needing to be a little bit more transparent with their rental rates and actually show what the rent schedule is going to be for a period of time. So, I think all of that, you know, kind of culminates in this little uptick here, but probably most of it is seasonality. Chris Berg: Interesting. All right. Another slide you want to go to next? Noah Starr: Yeah, I think what could be interesting is the next slide, which is page five. Chris Berg: Yeah, I like this one. Okay, break this one down for us, please. Noah Starr: Yeah, I love it. So, this is the REIT same-store occupancy per quarter with each year stacked against each other. So, it's kind of like a time series of what occupancy has looked like for the REITs going back to 2017. And you'll notice a couple things. So, I'm going to pick the best year on occupancy and then the worst year in occupancy. And surprise surprise what the worst year for occupancy is. But in terms of the best year, 2021 is this black line here at the very top, where you can see Q1 REIT same-store occupancy 95%, Q2 same-store occupancy, you know, close to 97%. Right? So really, really strong. I mean, think about storage facilities being 98, 97% occupied with rental rates and street rates and achieved rates all increasing. Like it was an amazing year for storage, and that's coming out of the COVID, you know, boom of folks, all the mobility that happened and, you know, the boom of the housing market coupled with low interest rates, things like that. You match that with 2025, which is this purple line at the very bottom, right? And we have the lowest occupancies reported since 2017. Chris Berg: Wow. Noah Starr: So, you know, here now occupancies for the REITs in the 91% range. And if you just think about the income loss, right, of that 7, 8% of vacant units that aren't paying a single dollar to the REITs, that is a pretty major rental rate or income decline as it relates to the REITs. So really interesting time series here. Chris Berg: I think it's fascinating you bring it up that way because, as we've seen, I think for the first time maybe since the GFC, was it four out of the five REITs had negative NOI, right? I think it was quarter — year-over-year, which is very rare within this asset class. So you speak to it well, showing the lower occupancies, obviously posing some issues now. But I think long term, I think you and I both agree, hey, the thesis is still bullish just because smaller homes, smaller apartments, more people multifamily. Long term I think things bode well for storage. Noah Starr: Yeah, and if you think about it, right, we've had an enormous amount of new supply hit the market, so the amount of storage that needs to be full today — like there's still a lot more Americans using self-storage today than there were in 2017, right? I wish I had the number off the top of my head, but a huge amount of adoption in the self-storage industry holistically. Yeah, maybe Public Storage has it here in — yeah, see, 1985, 2%; 2025, 10%. I think that number might actually be more around 12 or 13, of course, according to the SSA demand study, but either way, 10, 12%, it's on the rise. Chris Berg: For sure. Noah Starr: And, you know, so I think you have that going with you or going for you. And you even think about it — 92, 91% is still pretty good, right? You think of other asset classes. If you're in office or industrial, you could have a tenant leave and you go from 100 to 0%. Right? You don't really have that possibility in self-storage, which is a positive. At the same time, what I've been pretty consistent on is you have that increase of adoption of self-storage. One way to kill that adoption of self-storage is to have everyone have a bad experience in their unit with aggressive ECRI, with, you know, pricing that might be — might not be super transparent, right? So, I think the industry is dealing with that and I think making the right steps to address it. But still, you know, when you look at 91, 92% occupancy as being, you know, historically bad, I think that goes to show you how resilient the asset class actually is. Chris Berg: Do you think you're going to see 2026 turn and there's going to be higher occupancy, or do you think this 26 could be worse than 25? Noah Starr: I hate making predictions, just because — I look at a lot of data, but my predictions aren't going to be worth much, especially when Warren Buffett doesn't make predictions. I think ultimately I envision self-storage holistically being more transparent. I think we're going to be working with better data. And, you know, it goes to what we talked about maybe last week where you had 40 or 50% of developers were first-time developers, right? So there was a lot of mistakes made in the last 3 to 4 years. I think we're going to make less mistakes as an industry because we're, again, learning from this cycle. And if you're going to do a new storage development project, there are things you need to do today that maybe you could have gotten away with 3, 4 years ago, to hopefully protect the market. So I think there's going to be pain. These things don't get reversed in a month or a quarter. It takes some time. But, you know, holistically this is a big learning experience for the industry and I think that just is positive across the board. Chris Berg: I agree. I just have to weed out some people. I just want to share a couple of graphs with you and then get your comments, and we brought this one before. So just so people are aware, this is Public Storage, like kind of a September update, if you will, give some of the basic fundamentals. I think what's positive here, you can see the growth in the percentage of population using self-storage in the lower left-hand corner in the orange, and then you can see the blue there in the middle talks about some of the — excuse me — supply constraints that are happening. As Noah mentioned before, we completely overbuilt when you look at, you know, 2020, 21. That's starting to go down. And then if I share with you one more graphic here — and this I believe is from Newmark, just came out fairly recently, but I think this is powerful when you start to look out into the future, knowing especially now how long it takes to get development done. And I think they said in Vegas it's 500, 560 days is the average. And you start to look out here into 26, 27, 28, 29. Again, assuming we're not making predictions, but assuming this bears out to be even remotely true, that dramatic reduction in supply is going to bode well for how those assets that are coming out of the ground now or very shortly should perform pretty well in the next few years. What say you, my friend? Noah Starr: Yeah, I think we talked about this a little bit last week, but you actually brought up the point that I think the William Warren Group might have mentioned that it was the hardest period ever for development. And I think I'm seeing that as I talk to developers every day about how much has to go right for the project to even have hope of getting done. I think it's obviously challenging and frustrating if you're a developer, but, you know, holistically for the industry, these are the barriers that they're facing are because of all of the factors that we're talking about. And as less development happens, I think that's obviously beneficial for rates. Sometimes it becomes simple — like it's as simple as supply and demand dynamics, and the more you build the lower rates will be. So, you know, as development's harder, as the industry's gotten smarter and is making, you know, better decisions, then I think that that bears out where you'll have less new supply and a different environment going forward. Chris Berg: Noah Starr, CEO of TractIQ. Noah, I want to give the last word. Anything else you want to add or share that we haven't talked about? Noah Starr: Chris, we're just getting started here. I mean, I'm so excited to keep doing this with you. You guys are awesome partners and, you know, we're continuing to try to push forward additional data that we can provide, additional insight we can provide. You know, this is Q2's report. We're — you know, Q3 is almost wrapping up, right? So I think hopefully we'll be here in a month and a half or sooner with the next version of the report. Chris Berg: Fantastic. We appreciate the great work you're doing and what you're doing obviously to add more transparency to the data. This is Noah Starr. I'm Chris Berg. Thanks for joining us. We share this. — END OF TRANSCRIPT —