Self-Storage National Outlook 2025 - Yardi Matrix

THE SELF STORAGE REPORT — EPISODE TRANSCRIPT Episode: Self-Storage National Outlook 2025 - Yardi Matrix Presenters: Jeff — Yardi Matrix (economy, capital markets and housing); Tyson — Yardi Matrix (self-storage research, supply and transactions). Surnames and formal titles are never stated on-air in this recording. Recorded: August 28, 2025 Video: https://www.youtube.com/watch?v=px4-nmCpCc8 Key topics: Q2 2025 REIT results and negative 0.3% weighted-average revenue growth; NOI margin compression and property taxes as the number one expense line; advertised rents down 8% from the July 2022 peak with climate-controlled rents up 0.5% year-over-year; REIT street rents now only about 6% below non-REITs versus an 11% long-run average; oversupplied Sun Belt metros including Atlanta, Las Vegas, Phoenix, Philadelphia, Charlotte and southwest Florida; recovering markets including Washington DC, Chicago, San Francisco, Seattle, Minneapolis and LA; secondary-market outperformance in St. Louis, Detroit, Indianapolis and Kansas City; lease-up properties renting about 15% below stabilized competitors; over 20% of properties under construction above 100,000 net rentable square feet and 76% multi-story; more than 50% of the last three years of development by developers with three or fewer projects; U-Haul, Public Storage and Extra Space as the most active developers and managers; nearly half of under-construction projects facing added supply within a 3-mile trade area; planning timelines stretching past 550 days and construction past 500 days; transaction pricing recovery with a Houston portfolio near $230 per square foot and New York assets over $700 per square foot; valuation cap rates around 5.5 to 6%; 10-year Treasury range-bound at 4.25 to 4.5% with inflation settling at 2.5 to 3%. 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. ————————————————————————————— Jeff: Monetary policy which is restrictive. The 10-year is moving around 4 and a quarter between 4 and a quarter and 4 and a half. And so what we have is a sort of a slow growth economy that's going through really a change in the fiscal policy mix which we do think accelerates growth into 2026 when we come out of that. But I think, particularly important, as we'll discuss later, that 10 year isn't going to move much which means mortgage rates really I don't see really moving much. So I don't think there's going to be a tailwind from a sudden surge in home activity home sales activity. The labor market is tightish due to demographic reasons, but we'll need even higher productivity from things like AI will be needed to sort of like make up the gap as population growth slows as a part of the new policy consensus around a lower level immigration. So the other part is we do have a structural housing shortage which is largely self-induced due to building regulations and zoning and permitting. I think that lasts at least 10 years. There is supply being added and that supply will get absorbed through 2027 and then you're basically building the next upcycle in terms of national rents. So Tyson what about the storage fundamentals? Tyson: Sure. Thanks Jeff. And thanks everyone for taking time out of your day to join us here. I'll start off with the punchline. As we've been hinting at in past webinars, it does seem like the sector is at a crossroads. Although the turnaround has been a bit slower than we would like to see. Demand at least by recent standards is muted due to a weak housing market and slower migration. However fundamentals do seem to have stabilized with fairly flat occupancy and rent growth in Q2 2025, which is an improvement over the past several years. There does seem to be a shift in rental rate strategy recently which has been led by the REITs. And heavy localized supply pipelines have been a drag on advertised rates that we track. But over the past few months rates nationally have been flat year-over-year. Advertised rates have become somewhat disconnected from in-place rates at the market and trade area level. These trends are a strong indicator that the supply and demand dynamic is improving as well as performance. Fortunately new supply is waning and the sector appears to be well positioned once demand from people moving kicks back in. So we'll jump into the Q2 REIT results which we're about a month out from those. We wanted to get a quick summary of our observations. Since the public companies have such a strong influence on and really are a bellwether for the sector. Q2 results were a bit disappointing. Since fundamentals including occupancy, revenue and NOI growth decelerated after multiple quarters of improvement. Revenue growth has been stunted by lower occupancy. Although improving new customer rate growth is one sign of hope. Expense growth will continue to outpace revenue growth as recent property tax increases have more than made up for a drop in property insurance and marketing growth. My biggest takeaway from the wide range of results here is that the different companies are employing different rental strategies but also local market supply and demand dynamics are influencing different results. And this has been noticeable in our data for 6 months to a year. For instance, Sun Belt markets that really sizzled during the pandemic due to historic migration are now facing kind of a never-ending flow of new supply. At the same time migration has plummeted. And this includes southwest Florida from Sarasota down to Naples, Atlanta, Las Vegas and Phoenix. On the other hand, a number of markets have avoided new supply in recent years as developers have chased population growth, and have seen steady or increasing demand. This is places like Washington DC, Chicago, San Francisco, and Seattle. That really have already turned the corner and are posting rent and revenue growth. Before I turn it back to Jeff and we get knee deep in the data and slides, I want to finish with a personalized note to all the different groups out there. So what does this mean for you? Well if you're in operations it could mean that you should start considering pushing asking rates. Being mindful of new supply in lease-up or under construction. For owners this means that the dog days are somewhat over. Although the recovery will likely be slow, it could turn quickly. So make sure you're prepared. At a higher level for investors, the wild swings in market performance in recent years highlight the importance of having a geographically diversified portfolio. For developers, advise you to think outside the box. There's a new section of the presentation here which focuses on a detailed analysis of our supply data. Strong performance during COVID has led to overdevelopment of some parts of the Sun Belt and west coast in particular which has had a detrimental and potentially irreversible impact on rents in those areas. This makes having the best, highest-quality data really key to your success. For contractors and building suppliers. They should also be ready for the next upcycle and as we'll show later there are hundreds of stalled developments in our database that should be ready for the next upcycle. For the investment sales professional, things are really looking up right now. Pricing seems to have stabilized with a slow improvement in fundamentals which should open up new opportunities. This also will mean more opportunities for the debt professional, although I continue to be wary of construction lending. Also focusing heavily on what the data shows for new supply. So with that, I'll turn it over to Jeff to cover the economy. Jeff: Yeah, sure. And thanks Tyson. Let's go to the next slide. Okay. So just on a high level there's a several sort of major trends that are sort of you know kind of flowing through and driving a lot of these things. We are in now a period of time which started in 2015ish but now is really sort of entrenched in geopolitical and economic deglobalization and what that means is there's going to be an ongoing sort of reindustrialization nearshoring and I would say stickyish inflation. So I doubt inflation gets much below the 2.5 range. But money supply is relatively tight. So there is a fiscal sort of like you know generalized inflation as Milton Friedman said is everywhere and always a monetary phenomena and you just don't have the blowout in the money supply to sort of drive that. But definitely nearshoring and I would say somewhat sticky inflation. We are in a period of time from demographically of an aging population and very much declining birth rates and really slowing to no population growth absent immigration which has kind of been decided not to do so. So tight labor markets by and large are the thing we're going to live through. And so there is a demand supply balance, obviously, to be picked but also be mindful that migration will sort of continue but at a much slower pace. And that's kind of the people side of it where as a country we are still working our way through the COVID aftershocks. One of them is the level of hybrid work which is somewhat ingrained. And right now a higher government debt-to-GDP ratio which does need to be resolved but won't be probably until 27ish and maybe 2029 but it needs to be resolved in that time frame. What that means spreading US population continued suburbanization smaller future urban cohorts and generally speaking until the fiscal deficit in the US is brought down to 3% you know we're at a period of longer-term, higher interest rates which means again put a spread on top of that and you got your mortgage rates both single family multifamily and other debt instruments we do have a housing shortage it's been compounded post-GFC and the supply surge which we are now going through dissipates by 2027. I do not think the housing shortage gets resolved and therefore we are in another upward cycle on the rent side and home prices well will probably work sideways from here as opposed to a big drop just because you can't engender another housing and banking crisis if home prices really collapsed. And the ongoing level of political polarization. So local responses really do matter and there really are different local responses to housing shortages. Let's go to the next slide. So I would just sort of describe the US public policy and this is the only slide I'll have on this is really a new policy mix from the Biden administration which is I'll sort of call it the revenge of the physical world. There's certain disinflationary components to it. Energy production being a big one, government deregulation being another, and lower taxes kind of being the third. That's the disinflationary part of the policy mix. The inflationary part of the policy mix is a renegotiation of 80 years of security and trade policy with China being kind of the big one, right? You saw sort of Europe, other parts of the sort of developing world. You've still got you know the major trading partners to lock down Mexico Canada and China but they're sort of at the back of it. So that's a major lift. Immigration policy now is designed to engender higher labor costs at the bottom end and it benefits political base and so it's designed to be offset by these other factors. And it is kind of a recalibration. Government spending is still high. It is historically high. 6 to 7% deficits as a percent of GDP are not sustainable. They're not really going to touch entitlements, but guess what? They will have to again, but at some place in a couple years. So, that really needs to be addressed. Any questions you have on that, read Ray Dalio's How Countries Go Broke. Best thing I've ever read about it. So, what that means is yes, I do expect short-term rates to come down some, but no, I do not expect long-term rates to come down until those other issues are resolved. And so those are the implications of that. We'll see a little bit more of a yield curve, positive. Let's go to the next slide. From a GDP standpoint, the first half is really 1 to 1.5-ish. I do think we sort of go through this transition in 2025. We come out a little bit stronger to 2026 as other elements of the policy mix kind of come to the fore. I think we'll see a little bit of uptick in inflation and then it kind of comes back down now. And what Tyson just kind of flipped over — Whoops. There. There we go. Let's go back one a little bit. There we go. Unemployment going up a little bit but then kind of coming back down. And you can kind of see where I do think you'll see some short-term cuts, but I don't think you'll see anything on the long end. Let's go to the next slide. And housing is the long pole in the tent. If you took out housing, you'd be at 2% inflation. So, the fact of the matter is it's much more housing than it is necessarily a tariff impulse. Tariffs will be sort of absorbed you know and spread between the different parts of the supply chain as we're seeing already from to a certain extent the producer the wholesaler and 20, 25% of that impact will eventually be absorbed by the consumer depending on the sector but again you don't have enough money supply to really engender generalized inflation and so inflation will kind of bounce around in this kind of 2.5 to 3% range setting up the stage for the next sort of you know movement forward in monetary policy. Let's go to the next slide and with that I will send it back to Tyson to actually focus on storage demand. Go ahead. Take it away man. Tyson: Thanks Jeff. So before I get into the self-storage data I would like to first cover the factors influencing self-storage demand from a number of different angles. As everyone should know by now, population growth has been in a long but steady decline counteracted recently by increased international migration both legal and illegal. The two lines here show 2 different estimates of population growth. The one from the Congressional Budget Office includes an estimated increase in non-citizens or legal aliens. While I won't get too much into my personal opinion on this matter, I will say that the absence of immigration will no doubt mean continued slower population growth. That's just from a demographic standpoint. And inevitably that'll also mean slower demand growth for self-storage. Another complicating factor in self-storage demand recently has been slower domestic migration following two years of near historic highs in 21 and 22. This census data which we highlighted in our last webinar is over one year old by now but if self-storage performance reflects migration trends then I'd venture to say we saw another big drop in migration since July 2024 but we'll know more in December this year. Another indicator of slow migration could be slow home sales, which as a percent of households shown here plummeted to a near 30-year low in 2024 and have remained around that level so far in 2025. For this reason, moving as a reason for self-storage demand has ceded its top spot to not enough space, as indicated by our annual StorageCafe demand studies. Here you have one from 2022 and one from 2025. This played out by market performance as well as the markets that are more dependent on moving as a source of demand have seen the biggest slowdown with record growth turning into record declines in rents and revenues. One other observation from this data I wanted to share with you is that existing self-storage customers and the share of respondents planning on using self-storage has increased modestly in recent years, which I do think is one initial indicator of a turnaround. There are still markets where homes are selling, shown in the darker colors on this map. These are mostly more affordable, smaller markets in the Mountain West and Midwest. And then detailed here in this table. Some of the Midwest markets with strong home sales have seen that translate into stronger performance. But then in other places like Cape Coral, San Antonio, and Birmingham, this activity has not gone far enough to help storage performance, and likely there are some pretty heavy supply pipelines in these areas. And since home sales data can have a lag, we're also tracking mortgage originations which ticked up in Q2. However, I would note that this increase could be due to more expensive homes selling and higher home prices overall since this chart is based on dollar volume. At a market level, it does appear that many of the more affordable housing markets are closer to their peak in mortgage originations. Shown in the left here. While housing markets like Boise, Austin, and Miami that have seen the greatest drop in affordability have been much more slow to recover. That affordability does seem to be the main reason for the decline in home sales in addition to interest rates. And this chart here just shows how much more it costs to own a home versus rent in recent years. Jeff [attribution inferred]: Yeah. Yeah. And Tyson, we're also seeing that as you see here in multifamily. Yeah. With much higher retention, that translated to much lower turnover in the multifamily sector as well. Tyson: Yeah. And this is kind of the other side of the housing market. Despite you know record apartment construction in 2024, it appears that renters aren't really moving as much as indicated by the overall decline in lease turnovers which we're tracking. And those supply and demand dynamics have played out in apartment rent growth as well, which sometimes can be an indicator for self-storage rent growth in multifamily as well as self-storage. Sun Belt and Western markets with the heaviest supply pipelines have also seen the greatest rent declines. And lastly, we can look at the Google Trends data for self-storage as kind of a counterpoint to the housing market. In previous presentations we focused on self-storage as a search term. But I think that could be too limiting since search behavior is constantly evolving. This chart shows Google trends for self-storage as a topic — so, much wider net. And it shows that searches for self-storage as a topic were at a 4-year high as of July. While I don't think one or two months of Google search trend data has translated into booming demand it has somewhat correlated with an improvement in advertised rate growth in our data which I'll get into a little bit later. At a market level markets that have seen the highest search volume relative to their peak have also interestingly posted some of the strongest rent growth. While those markets that are furthest from the peak include many of the same Sun Belt markets that have struggled to grow rents. So now turning to self-storage performance. We'll start off here with the most recent REIT results. This first slide shows weighted average revenue growth for the REITs which was negative 0.3% in Q2. A bit of a deceleration from Q1. And I'll get into the kind of the reasons why revenue growth has decelerated on the next few slides. But first I wanted to take a look at NOI margins. NOI margins have been coming down from their peak. And this is a direct result of the decline in revenue but also an increase in expenses. And those NOI declines in recent quarters have really been the result of increasing expenses over the past few years. Growth in expenses in 2023 and 2024 was led by ballooning property insurance bills increased marketing spend as demand kind of faltered. Both relatively marginal costs for running a self-storage property. But as those cost increases subsided, property taxes, which is the number one expense line item for the industry, has started to increase in recent quarters. Interestingly, personnel expenses have remained relatively flat since 2020 despite increasing wages nationally. As operators have really found ways to infuse technology and research to limit these costs. Looking at REIT occupancy. We did see occupancy year-over-year shown in the gray bars here come down in Q2 after it had been improving for 4 straight quarters. And that decline in occupancy really is what led to weaker revenue growth performance in Q2. We did see self-storage realized rates flatten out in Q2, which I think is a result of the REITs really pushing street rents, which I'll also get into later. While occupancy has been flat to declining in most of the top REIT markets, there are a few high supply markets like Atlanta, Las Vegas, Philadelphia that have begun to see an improvement in occupancy as rental rates have dropped signaling kind of a way out of this supply bubble. It's also worth noting that the top two markets here, San Antonio and Tampa, are likely seeing stronger performance due to flooding related demand. And then lastly, this is a chart we've covered in a number of presentations. This compares REIT advertised rates or street rents to their non-REIT competitors in the same markets and realized rents per square foot from the REIT supplemental materials. It isn't an apples-to-apples comparison since I don't really know what's in the REIT same store pools, but it is interesting to note that since the REITs on the dark blue line here started dropping rates pretty aggressively in 2022 in-place rents have really flattened. And this just kind of shows that even though they were testing out this new strategy of discounted rates and more aggressive ECRI programs, it hasn't really helped to grow in-place rates or revenue. And that's when we really did see kind of a turnaround in strategy really starting in Q4 last year with the REITs pushing rates pretty aggressively since then. So now a deep dive into our self-storage advertised rates. I'll start off with a map of our market coverage. And I just wanted to note that we have expanded our coverage in recent years. We have detailed data on over 36,000 self-storage properties including rent data for more than 28,000 properties. And I'd also like to just note here that we will be somewhat changing our top 30 and secondary 30 markets in the coming months to really reflect the largest and most institutional self-storage markets. This will be reflected in the coming self-storage monthly reports which, if you're not already subscribing to, please reach out to us and we'll get you added to the distribution list. For the past year we've been adding about 3 or 4 markets each month. Most recently we've expanded our coverage to include Burlington, Vermont, Springfield, Illinois, Lebanon, Vermont, Valdosta, Georgia, a number of other smaller markets throughout the Midwest and Northeast. And we'll continue to grow to cover the top 300 metro areas and beyond. So starting off with our rent index here, rents — this is for advertised rates. So, the rates that operators post online and I would like to just reiterate that we're tracking rents both from web scrapers and manual data collection. So, a pretty comprehensive list here. This is a rent index using same store rent growth and this is for stabilized properties. So, kind of trying to remove some of the impact of new properties opening which usually are leasing up at much lower rates. We have seen rents come down 8% from the last peak which was in July 2022. But we have seen an increasing trend over the last really 9 months. Particularly for climate-controlled rents which are up 0.5% year-over-year. And then that growth for the different unit types is shown here on the chart. This is same store advertised rate growth. You can see climate-controlled units have been positive really since the beginning of the year and outpacing non-climate-controlled units which previously kind of during the last supply cycle rent growth in non-climate-controlled units was a little bit better or I should say rent declines were a little bit better than for non-climate-controlled units. So bit of a turnaround in the situation in recent months with climate control outperforming. And then looking at rent growth same store rent growth month-over-month. This chart really shows the seasonality of the sector. Typically rents — the blue line here shows kind of the pre-COVID average. Rents really grow from March through July, although we did see rents decline month-over-month this most recent July. But we had seen stronger month-over-month growth really from starting in December of 2024 through June. And that has kind of led to the flattening of rates year-over-year. And I do think looking at the back half of the year 2024 we saw pretty aggressive month-over-month declines in rates more than kind of typical. And I do think that those easier comps mean that rent growth year-over-year should improve throughout the remainder of the year. So now looking at the monthly data which compares REIT rents to advertised rents to non-REIT rents in the same markets. You really can see over the past really 9 to 12 months REITs have been pushing street rents up, now only about 6% lower than non-REITs in July and this compares to an average going back to 2019 of around 11%. So really kind of interesting change in rental rate strategy really being led by the two biggest REITs. Looking at rate growth REITs have posted year-over-year growth in street rents since January 2025 and have been outgrowing their non-REIT competitors. So I think this is an important signal that the REIT operators are getting more confident in demand and more comfortable with occupancy. And have finally started to push advertised street rents which should provide some support for in-place rent growth and revenue growth. Then this is a really interesting chart. Just shows rents by year built for properties. Again I mentioned that our same store rent growth tracks stabilized properties but here in the blue lines you can see how rents have trended for new properties. Interestingly during COVID typically, I would say, pre-COVID operators were using lower rates to fill up properties, lease-up properties, sometimes as much as 40, 50% below market. That did seem to turn around during COVID when there was really strong demand for self-storage. But over the last 2 to 3 years we've seen rates for lease-up properties really slump and now, for a property built in the last year, are about 15% below their competitors. And then just quickly a couple notes on rent growth. Really the top markets have seen the most improvement in rate growth recently. These are also places where rents are typically higher. And a lot of that has to do with supply being absorbed in these areas. And then also at a unit level larger units have really outperformed smaller units really throughout the last 7 years. And this is mostly because new development has focused on these smaller units which typically have much higher rates per square foot. So more competition for the 5x5s and 5x10s. Looking at our bubble chart, we attempt to show here both supply and demand factors for the top 30 markets. The bubble colors represent rate growth by market. Interestingly we have seen a lot more green and blue on these charts recently which is you know an indicator of a turnaround for the sector. There does appear to be a correlation between some of these demand factors that we included here which were population and multifamily rent growth. I think places like Austin and Denver and San Diego, which really haven't seen a ton of new supply, you can see here they're below this dash line, which is the national level, of supply in lease-up, those markets are being heavily impacted by weaker demand, whereas a lot of the markets where we're seeing growth also have lower lease-up supply but stronger demand factors. Places like Chicago, Minneapolis, DC, these places have been improving in the rankings, but also kind of leading the way on rent growth and kind of the first markets to recover. Interestingly, LA moved to the top position in July for the first time really since we've been tracking these rates. And I think what's going on in LA is operators are kind of getting ahead of the rent growth restrictions there which limit how much you can push rents to existing customers. And they're doing that by you know pushing rates up 1.2% month-over-month in July when nationally rates declined in July. Pushing street rents to kind of get ahead of those existing customer rate increase limitations. For secondary markets we see a lot more kind of positive rate growth. We see stronger demand factors, population and multifamily rent growth. And this has kind of been a consistent theme over the past 5 years. Smaller markets kind of seeing more migration and home sales. And interestingly a lot of these markets actually do have much higher lease-up supply particularly markets in Florida and suburban New York those markets are still seeing declining rents but have seen improvement which shows I think that they're you know slowly absorbing the new supply. It is a pretty interesting list of secondary markets that have seen the strongest rent growth places like St. Louis, Detroit, Indianapolis, Kansas City. You don't have a lot of new supply in these places and that's really allowed operators to push rate growth. You also don't have, I think, as much competition from the REITs. On the other end of the spectrum there are a number of smaller markets that are still dealing with absorbing new supply including Memphis. Some of the suburban areas of Memphis have seen a lot of new supply deliver and they just don't have that demographic or demand support. Jeff [attribution inferred]: If I can interrupt you for a couple questions that have come in. Why do REIT rents materially underperform non-REIT private rents? Intuitively, I'd think REITs would have the sophistication and scale to outperform non-REITs. Tyson: Yeah. So the rents that we were showing those are street rents. And the REITs have been pretty coy about their existing customer rate increase programs but really their strategy, especially over the past few years — I think this is a strategy that they've been employing for a while. Over the past few years, to kind of maintain occupancy, they've been using lower street rents and then we'll push pretty aggressive existing customer rate increases really now you know it used to be after you know the first 9 months then after the first 6 months really now they're pushing the first rate increase after 3 to 4 months and they're pushing those rates up to the in-place rates in that local area so they've kind of been using a different strategy using kind of what I would call like teaser rates to kind of maintain occupancy but I don't think that strategy has been super successful in helping them grow rents and in-place rents and revenues and you know interestingly the private operators have kind of been slow to adopt that strategy but they've really been moving towards that as well. Jeff [attribution inferred]: Great. Thank you. And then one last question for now. For the slide with annualized street rate by year property was built: Can you please re-explain the lease-up properties built less than one year ago — discount to market — and what that looks like now versus pre-COVID? You mentioned 40 to 50% below market pre-COVID. What is that now? Tyson: So on average they're about — this light blue line here shows properties built under a year ago and that's as of whatever month we're showing. So right now they're about I think it's 15% below stabilized properties which is properties built 3 years ago. Pre-COVID they were more in line but when I mentioned the 30, 40, 50% below that's for properties that are just opening generally they'll start off with rates especially the REIT operators this chart includes everyone leasing up a property but what I remember from my Heitman days looking at proformas was that the REITs would start off with rates, you know, 30% below and then kind of increase street rents up to market level after the end of the third year and lease-up. And then you know of course they would use ECRI to grow existing customer rates to market rates. So, whatever stabilized property rates were, they could get those customers up to in-place rates pretty quickly with those existing customer rate increase programs. So you can kind of see that, you know, the properties built under a year ago are further behind than properties built 1 to 2 years ago or 2 to 3 years ago. So, you can kind of see how they marginally increase rates up to market. Jeff [attribution inferred]: Excellent. Thank you. Tyson: No problem. So we'll jump into both our historical supply trends and our forecast. Just a reminder of the different stages of properties we're tracking. Prospective just means that a property or developer is seeking approval. Once they get plan approval we'll move it into the planned bucket. You can see that's where majority of our supply pipeline properties are. And I'll get into a little in a bit why that is. Under construction is once a property breaks ground. We won't include a property under construction if they're just doing site work, but once they're shovel in the ground, we'll move it into the under construction bucket. And then lease-up supply. As I mentioned earlier, we use kind of properties built under 3 years ago as kind of a proxy for lease-up supply. Obviously, you know, some properties and markets it could take a lot less time to lease up a property and in other markets it could take a lot more time. But because we don't have occupancy data, we're using that trailing 3-year supply as the proxy for lease-up. So looking at starting off here with our supply forecast, the bars here show net rentable square feet and then the blue line is percent of stock. We have seen supply as a percent of stock dip even though we've seen an increase in new supply delivering in 23 and 24. We've seen supply as a percent of stock dip below that long-term average. But I would just remind you of the population growth chart that I showed and since population growth is declining I think the amount of supply that's needed as a percent of stock will come down. And I don't know if that's you know maybe 3 or 2.5%. But we do see construction starts declining which has really led to a drop off in our forecast with consistent declines in new supply delivering in 25 26 27 I think further out in the forecast. We'll kind of have to wait and see what happens with performance. Again, trailing 3-year supply here is a proxy for lease-up supply. We have seen lease-up supply come down particularly as a percent of stock since 2020, which has been a nice tailwind for the sector. But we have seen trailing 3-year completions recently flatten more than decline. And then just looking at that lease-up supply for the top 30 markets. Majority of the markets that have the heaviest lease-up supply are in the Sun Belt. Mostly in Florida and the Southwest. Charlotte, Atlanta. Philadelphia has also seen a ton of new supply. Philadelphia used to be one of the top performing markets in the country and that really brought a lot of developers out. There are plenty of markets here that have very little supply in lease-up. And these are the places that have really outperformed. Comparing that percent of supply in lease-up as a percent of stock to 3 years ago most markets have seen a decline in supply in lease-up over the past 3 years. But interestingly there are a number of markets that have seen supply in lease-up increase. And this is mostly more recently. Really I would focus kind of on these four over here which have seen supply come up and not really come down. Markets to the left of the line here have less supply in lease-up than the nation. But I do think places like Los Angeles a recent increase in supply there could put a damper on rent growth. Although as I mentioned street rates are growing kind of in response to local restrictions. Secondary markets really have quite a bit more supply in lease-up, there are a few that have quite a bit more supply in lease-up. Particularly in Florida and the New York suburbs. And while this has impacted and kind of stunted rent growth in these places, some of them are performing okay and I think that's a sign that they're absorbing the new supply. But there are a number of trade areas really in southwest Florida and in White Plains and in Jersey that are struggling to absorb new supply and you really see that in rent growth which I'll get into in a minute. We're also tracking abandoned storage projects. So, we try to contact properties in planning every 1 to 3 months just to find out if they're still active. And a lot of them have stalled. But a lot of them, the ones that have stalled, the developers and local municipalities haven't been able to say that they're dead. But we have seen an increase in abandoned projects really over the last year and a half. Even though we've seen year-over-year abandoned projects kind of flatten out, we're still kind of way well above where we were historically. And this is something we're going to continue to keep track of. Breaking out the pipeline for under construction, planned and prospective. Showing here the top 10 markets in each stage with supply as a percent of stock. Again, it's a lot of smaller markets, a lot of Florida, a lot of Sun Belt markets, and suburban New York. And really here we're showing supply under construction as a percent of stock for the top 30 markets. Really, the markets that have the most supply under construction are the same markets that have a lot of supply in lease-up. So, it's going to be a very slow and arduous recovery for these places, particularly Vegas and Phoenix. You know, Vegas, I see a new project starting construction nearly every week. And without kind of that migration to the Sun Belt that we saw during COVID, it's going to be a long slow recovery. But on the other hand, you know, there are a number of markets, particularly in the West Coast and Midwest, where we see very little new construction starts. And these are places where the recovery is already kind of in full swing. And then comparing that supply under construction as a percent of inventory to a year ago, interestingly there are a number of top markets that have seen supply under construction pick up. That's all the markets kind of in this bottom right quadrant. Particularly you know interestingly Philadelphia still has a ton of new supply under construction. It'll be a long road to recovery there. And some other you know northeast markets like New York and Boston have seen it too — New York, I should mention here, is just New York City. But these places have a very long road to recovery because they have seen supply under construction pick up in the last year. Secondary markets really more of the same, which is to say that the places with the most supply under construction are also the places with the most supply in lease-up. So we have a new section here. You know since supply has picked up in recent years this section covers some new exhibits which really dig into new supply trends. Starting off here with new supply by type. The majority of deliveries since 2023 have been new builds instead of conversions and expansions. Conversion and expansions have become less common in recent years. Really due to the challenging fundamentals in a lot of these trade areas, but also a majority of the best conversion expansion candidates have already been built. However, there's still plenty of conversions and expansions planned. They just have been slower to start construction. More ground-up development in recent years has also meant larger multi-story properties. So, the average facility size has grown from around 72,000 net rentable square feet in 22 and 23, or 80,000 square feet in 2025, to over 85,000 square feet for properties currently under construction. Furthermore, over 20% of the properties currently under construction are over 100,000 net rentable square feet and 76% of these are multi-story facilities, which is up from just 55% just a few years ago. And I think this really complicates the new supply picture since many times these larger stores can take 3, 4, 5 years to lease up and have a negative impact on trade area rents during that time. In previous sessions we mentioned that much of the development activity in the self-storage sector has been by new entrants to the sector. The past 3 years over 50% of development activity has been by a developer with three or fewer self-storage projects under their belt. And 35% of those have been developers with their first and only project since 2015. This is very different than almost every other commercial real estate sector where experienced developers handle most of the building. I think this highlights why we've seen some overbuilding in certain areas since many times these developers lack the local market data and insight that kind of guides them to the right locations. However, there have been a few experienced developers, owners and operators that are still active. This table shows the most active developers over the past 3 years. Notably, U-Haul has built or converted more than twice as many facilities over the past few years as the second largest developer, Public Storage. And also besides the REITs on this list, many of the top developers here are merchant builders who usually hire third-party managers and sell properties or portfolios of properties shortly after they lease up. And then on that note, this chart shows the type of manager for recently delivered properties. REITs here includes U-Haul, which is a private REIT. While owner managed usually refers to mom and pop storage properties, the REITs have managed nearly half of all new developments since 2022, which is up from the previous building cycle and Extra Space specifically has accounted for half of the REIT management of lease-up properties. Another thing we have uncovered from our data is that recent deliveries and projects under construction are facing heavier supply pipelines. So the chart here shows the percent of developments by year plus under construction projects that have additional supply in their 3-mile trade area. Nearly half of the projects currently under construction have supply in lease-up or planned within 3 miles and nearly a quarter have another project under construction. And this overcrowding I think has really complicated rent growth even for stabilized properties as they try to drop their rates to compete. And then this is a somewhat complicated chart but this shows 3-mile trade area 10x10 climate-controlled rents 12 months before and 36 months after a new delivery. We see very different trends between the properties that delivered in 21 and 22, in the dark blue here, where rents were kind of on the upswing and then those delivered in 23 and 24 in the light blue when rents were declining. And in those trade areas with supply delivered in 23 and 24 it's taken 3 years to get back to the rents at the time of delivery. And even longer in trade areas with additional supply in lease-up or under construction. And then the bottom line here shows the 20% of trade areas with the biggest hit to rents where rents were still nearly 15% below time of delivery 3 years later. And then just to expand on that point, this map here shows 15 trade areas with the biggest drop in 10x10 climate-controlled rates from peak to now. With the trade areas with the top 15 biggest rent declines labeled. While rents have recovered slightly from bottom, rents are still about 30 to 60 plus percent below their peak in these areas. With little sign of recovery in sight. As you can see those trade areas are really spread throughout the country. But there are concentrations in the Southeast, Florida and around Atlanta as well as in New England. If you're a subscriber and you'd like to see the full list of these trade areas with details reach out to me after the presentation. I'd be happy to share it with you. And then for the trade areas where there's supply under construction, here we're showing the top 15 trade areas with the most supply in lease-up plus under construction as a percent of inventory. Most of these will see a 50% increase in supply once these stores deliver. And I think they could see similar declines in rents as the markets on the previous slides. It's also worth noting many of these areas have additional supply in planning. So I just caution developers to carefully consider the potential impact of building in these crowded micro markets. Jeff [attribution inferred]: And it also might provide opportunities for folks who are looking for stressed assets. Tyson [attribution inferred]: Sure. Jeff [attribution inferred]: Those areas — the whole area will be under pressure. Tyson [attribution inferred]: Yeah. Just make sure you don't catch the falling knife and predict the recovery. We're kind of running out of time so I'll kind of cover the last few slides from our supply forecast. I would just note that we have a new Q3 supply forecast, which was crafted by our own Ben Brookner. I encourage you to take a look at those supply forecast notes. Overall, we've seen a pretty big decline in the under construction pipeline, which really feeds into our forecast, which I showed kind of at the top of this section. One thing we have noticed in recent years is that it's taking a lot longer to build. You know, planned projects are in planning for over 550 days now. So I think a lot of this is due to the difficult performance and kind of market conditions we've seen over the past few years. But you know, under construction is now taking over 500 days to build. So really the pipeline has been stretched out at all stages. And just to kind of highlight that data, these two charts show how long supply has been in planning before starting construction on the left and our existing plan pipeline on the right. Plenty of projects in planning. More than 40% were initially conceived 2 years ago or more. While the construction starts over the past few years were really planned more recently. So, a lot of kind of delayed projects out there. And I think that this data has been helpful for some of our subscribers. I won't cover the supply forecast, but you have the numbers here. We do see supply as a percent of stock declining. I want to just real quickly cover our transaction data. So we are estimating pricing for properties that are missing and we do have pricing for most of the sales. And over the past really over the past year we've seen transaction volume kind of pick up from really lows kind of in the second half of 2023. Even though we've seen fewer properties trade this year-to-date versus last year we have seen volume pick up and this has really been because of an increase in pricing which is kind of detailed here on this chart. This shows transaction volume and price per square foot by class of property. So we have seen really all of the different classes of properties. We've seen pricing per net rentable square foot pick up this year. And I think this also is another indicator that people are getting more comfortable with where the market is and with where pricing is. And something definitely to keep our eye on. Looking at volume by type of buyer. The REITs have really become more active this year after 2 years of really kind of sitting on the sidelines versus kind of their historic levels of transaction volume. So the REITs have really kind of picked up the pace of buying this year particularly Public Storage — I show here that Public Storage has been the top buyer over the last 12 months and really most of the top 5 here are REITs. So REITs continue to kind of drive the market when it comes to transactions. There are a number of investment groups on this list that have remained active as well. Overall I've heard from a lot of people in the industry. There's plenty of capital out there for acquisitions. I think it's been a bit slow on the listing side. But interestingly just in the last 2 months we've seen pretty big pickup in portfolio sales. I won't go through each of these. These are mostly pretty small portfolios. 10 properties or under but all of these have occurred just in the last 2 months. So it does seem like there's a lot of momentum in the transaction market going into the second half of the year. Some of these portfolios traded for a pretty big price per square foot. You know, Spart bought a Houston portfolio for around $230 a square foot in June. Storage Post paid over $700 a square foot for 3 properties in New York. So I think the pickup in pricing is really promising for sellers. And then lastly we have NCREIF cap rates. This isn't for property selling but valuation cap rates. So we've seen those for storage really been stagnant since 2023. Although what I hear from people in the market is that storage cap rates are really kind of around 5.5 to 6%. So that'll do it for us. I did want to mention, I will be at the SSA fall conference next week. I have a speaking opportunity on Friday. If you're up bright and early and don't stay out too late on Thursday, come see me. Otherwise I will be at the trade. — END OF TRANSCRIPT —