The Storage Report: Is the economy softening? Fed and Lennar may be saying YES

THE SELF STORAGE REPORT — EPISODE TRANSCRIPT Episode: The Storage Report: Is the economy softening? Fed and Lennar may be saying YES Guest: Thaddeus Campbell — S3 Partners Host: Chris Berg — Abernathey Development Recorded: June 21, 2025 Video: https://www.youtube.com/watch?v=GjS1QhTD4Go Key topics: SVN operator survey with 30% seeing new supply and 53% reporting occupancy flat or down over 12 months; first street- and web-rate uptick reported in May; Google search demand trend; REIT street rates converging with achieved rates since Q4 2020; California and New York City rate-cap bills; Lennar average selling price net of incentives off almost 20% from the Q2 2022 high; Lennar incentives at 13.3% of revenue, highest since Q4 2009 and Q1 2010; June 2025 Fed SEP cutting real GDP from 1.7% to 1.4%; unemployment revised from 4.4% to 4.5% and PCE inflation above 2.7% on tariffs; homebuilder sentiment near pandemic lows; Microsoft layoffs and AI eating white-collar jobs, 2x unemployment for recent computer science grads; a $400,000 house at 3% versus 6% against a $69,000 median income for ages 45-55; 61% COVID rate spike; Philip J. Anderson's real estate cycle and The Secret Life of Real Estate and Banking; mid-2026 as the watch point 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. ————————————————————————————— Thaddeus Campbell: ...cast joined as always. He doesn't want to introduce himself. I'm gonna introduce him today. The the handsome Chris Berg, former Stanford Cardinal quarterback, current acquisitions lead for Abernathy Holdings, uh host of the CRA report. Incredible list of guests that he has on there. You guys will see through the course of the report today, uh links to his podcast that you can sign up for so you can see the guests he brings on as well as mine. We want to jump in today. We've spent the last couple weeks talking about a couple pretty cool things that are really we're starting to get more data on as far as the housing market. You know, obviously movement is a big impact in the self-storage space and then also the turnaround increase in Google searches. We talked about last week and whether associated directly or not. Uh the first time in a long time that we've seen street rates and and web rates take an uptick was reported in May. So, we've got some more data that's come our way over the course of the time. Chris, really happy to to dig into some of that data and really talk with you about what you're seeing here and how you're interpreting this. Now, the first thing I'm going to bring up is a couple of graphs that we have where this came from SVN. Um, SVN did a survey of a bunch of operators and so they asked a couple questions. One was, have you seen new supply in your market in the last 12 months? Almost 30% of operators have seen new supply coming into their markets. Now, obviously, you're an acquisitions director looking at ground-up development. Um, this is something you're you're very familiar with. There's a lot of development that's happened in the last couple years. Um, not that not as peak as before COVID, but definitely this is something that's a challenge in our market. The question becomes, does this amount of new supply start to have a negative impact on the rate growth that we're going to start to see? So, the next graph that I was actually even more surprised by in the SVN report in the newsletter was occupancy trends. So, you're seeing here 53% reported, this was a survey of operators, so it's not perfect data. Um, not necessarily every operator was touched, but a cross-section large enough to get a pretty good idea of what's going on generally. And this goes over 12 months. Now, obviously, we saw in May there was the trend of an uptick May to May, right? Year-over-year, but over the course of the last 12 months, occupancy has been actually stable or trending down in almost 90% of operators' facilities. So, a couple of data points that I ran across this week, maybe counter to what we've seen for more recent data trends as far as the increase in Google search and the increase in rate, makes it very interesting and I'm going to ask your thoughts, Chris. For me, very interested to see what we see for data coming out of June. Chris Berg: Definitely agree with you on the the June aspect and the data points there. I think one important note at least based on what I read from this data is that it was more interviews that she's done with like operators that she works with and knows. So I think it's important to compartmentalize like the data you're seeing here is, say, these are personal interviews, conversations she's having with people, which is great. I think that's great to share that information. And you know, if you get into the financials of the REITs who are managing thousands and thousands of sites, I just think in my opinion it's much better data pool to pull from. And so when you see some of the REITs talking about, hey, occupancy's been up, you know, year-over-year, rates have been up year-over-year, we're starting to see some some things trending in the right direction, and then you lay the Google search data that we talked about last week on top of that as you just mentioned, I think the June data point is going to be fascinating. I think that's going to be a higher high from what we've seen, not from the COVID years but from the previous, some of the previous years. And I think it's going to hopefully set kind of a new floor, because then as we know it's going to go all the way back down until June, excuse me, till January, but hopefully there's a new floor there that's a higher low. Sound like I'm talking about stocks, but it's kind of how it's playing out, right? A higher low, and now we can start to go back in in another positive direction. Thaddeus Campbell: Definitely looking forward to seeing that. Listen, I shared a couple of data points that I saw that I thought were interesting and counterpoint to this kind of positive news that we've been seeing, and and your point is very well taken that it it it is not overriding data. It's one person's experience through interviews. Right. I wanted to share my screen real quick. Arman Aagenians, who most of you in the industry follow on LinkedIn, probably the most uh most well-known presence in LinkedIn in the self-storage space. He shared this today and I thought this was fascinating. This is a graph that's comparing the REITs' street rates to achieved rates. And one of the things that's been very challenging for people like you and I, Chris, over the last couple years is street rates across the country were not necessarily indicative of achieved rates in any way at all. And so it's very hard as a developer to go look at data that's available, whether it be Yardi or TractIQ or Radius+ or StorTrack, and make any type of a a real solid foundation about what our achieved rates might look like over time. What this is showing is that from Q4 of 2020 until now, what is being listed as street rates is starting to look much more like what the achieved rates actually are for the REITs, which I think for us in the development world is pretty good news. Chris Berg: I think it's great news and I think it also speaks volumes of what you and I spoke about recently, where I think the REITs are realizing like the last place you want to be on the planet is on the lips of legislators. And so I think they're kind of going, hey, you know what, we can kind of change this business model, still keep our year-over-year revenue strong, still keep occupancy strong, and most importantly, you know, add value to our assets, but also keep ourselves away from any sort of regs that potentially could dramatically damage the the value of these portfolios. Thaddeus Campbell: Yeah, we've obviously covered that the last couple weeks with what happened in California and then a couple of bills that crossed the desk in New York City. Um, you know, my dear hope is that we've kind of gotten the message early enough where we avoid any large-scale legislation coming out that caps rates. I'm not as nervous about transparency laws. I don't think that's going to have as big of an impact on us. On the flip side, to your point, as you've always said, you know, that's a slippery slope to go down once you start having legislation start to curtail your asset class. I want to stay out of that. Something that you've been talking about. Um, we discussed the housing market and and what's going on. And so, I wanted to call up a couple of things that you shared with me this week about Lennar and what's going on with the home builder. So, I'm going to share this graph of Lennar's average selling price, net of incentives, right? So if they're giving a discount for different things, this is inclusive of that discount, right? Taking that off the total price. Uh, a little bit of a — and this is one of those things for me that is, it could be good news for storage. It could not be so good news for storage, sort of depending how you look at it. I want you to to tell me your interpretation of this. Chris Berg: So, the way I'm interpreting this data, and I'm going to bring up another um data point here in a moment, but is the fact that year-over-year Lennar has now reduced the price of their homes, you know, almost 9%. Uh, since the high there in Q2 2022, I mean, it's off almost 20%. If you listen to the earnings calls, you know, the market is clearly softening in the housing market. Um, I don't know if you've got the other graphic, but they also — the incentives now that they are offering these sellers is up dramatically. So this one I think talks about their actual margins is down. But I want to do this in the context — I think one of the important conversations, um, if you'll allow me to share my screen. Thaddeus Campbell: Yeah, absolutely. Get rid of this. Chris Berg: Important things that you and I were trying to talk about recently is like, okay, so we see this increase in demand in Google search, but it doesn't really line up with what the housing market's saying because yeah, there's a bunch of listings but there hasn't been a ton of transactions. And so one of the things that I think is interesting — and again I'm so techn— I'm gonna apologize. Thaddeus Campbell: You don't have to apologize to me, as it took me 20 minutes to get you the right link to join the studio. We share a little behind the scenes action. Chris Berg: How I'm handling this, but hope you can see my screen. You can see homebuilder sentiment, you know, near pandemic lows. That's one thing, that's the data point that I really want to get at, which may begin to help explain um why we're seeing the uptick in Google searches. This is from the SEP doc, summary of economic predictions from the Federal Reserve, which they, you know, announced yesterday. We're going to keep rates flat, right? Which, what is really interesting, and I'm going to do my best here. You can see change in real GDP. Back in March, they thought, hey, 2025, we're going to be at 1.7. They're now softening that to 1.4. So, that's not good, obviously, from a growth perspective. I think from from us, from a storage perspective, why we may see some more demand picking up — and you and I touched on this too recently — in March, they thought, hey, we're going to see a 4.4 unemployment rate. Now they're projecting 2025 it could tick up to about 4.5, which speaks to what we said last week, like, hey, back in the day you're like, hey, if I get a, if I get a computer science degree, like I'm golden, right? Not so much anymore. A lot of these new graduates, I mean, you're talking about high unemployment rates in that newer grad demographic, which again, is that leading to all the demand that we're seeing in the Google search? I don't know, but I think this starts to speak to there's a lot more hesitation on hiring, you've got more unemployment, which thus has people, you know, either moving and or living in with their parents or whatnot and then storing more stuff. And then I think you see this PCE inflation was projected in March to be about 2.7 for the year. Now they're thinking, hey, this is going to go up possibly due to the tariffs. My point in all this is when you start to get to the rates, is what's going to move the Federal Reserve, right? There are two things that they focus on is obviously inflation, but then also unemployment. So, which one are they going to focus on? My gut tells me, and if you look at some of the bonds and what that market's doing, it's probably going to end up being more the unemployment that's going to move them to go, you know what, this unemployment thing is getting to be higher than we want it to be. We've got to start to lower rates. And we'll see how that plays out. Which again, lower rates for developers is typically good news. Thaddeus Campbell: You know, I think something we should do for next week, and I'm saying this off the cuff, is, sometimes it's interesting when you go in and you look at the cost of a house at different interest rate points, right? If you look at a house at 3.5% and what your monthly payment is on a, let's say a $400,000 house purchase, 3 — we were below 3 at the, you know, when the pandemic was going on for a while there until April of 2022. You know, now you're looking at 6, 6.5, 7, depending on the day. The difference in your monthly payment on a $400,000 house is staggering. You know, you take the the highest median income of any age bracket in the country right now, I think, is 45 to 55 and it's $69,000. You cannot afford a $400,000 house at a 6% interest rate with that income level. And so it'll be very interesting to see if if unemployment does continue to creep back up, does the Fed make the decision to lower prices, or lower, lower the Fed uh rate in order to try and create some more movement in that home market? Because quite frankly, with what's going on in the overall economy, having the housing market get slower than it's already been is not a really good sign for everything that's going on. Chris Berg: No, it's not. And I think um, you know, typically when you go into a recession I think is what makes storage an attractive asset class for a lot of people, because it's it's obviously been very very stable — again, if you take out the COVID years — but it's been very stable for a prolonged period of time, which if you're an institutional buyer, you know, that's what you're looking for, is just the stable returns. But to speak to what you're saying, you start to lay on, hey, there's lower GDP growth, so that's not going to be good from a hiring perspective. But then I wanted to share this as well: my friend Darius Deo put this out where Microsoft now laying off more people on the short-term horizon, again predominantly because of AI. And there's a lot of conversation going on right now, right? AI is going to eat up a ton of white collar jobs. Now, how fast, I don't know, but again it's pretty clear when you see computer science guys, recent grads, not getting hired, and there's 2x unemployment in that demo versus art history degrees, like people need to start to go, wait a second, something's shifting here, right? Thaddeus Campbell [attribution inferred]: I feel way better about my English and history degree from Tufts, man. I I was like, I look back and I should have got computer science. No, I'm all right. Finally, it's turning the corner. And I'm laughing. It's not, you know, it's not good news by any stretch of the imagination. But on the flip side of it, it points to what the truth of going forward is. I guess my big question here is, do we see a confluence of events coming forward that actually hits self storage in a way that it's never hit before? Right? Because one of the big things people say about self storage is it's recession resistant. Right? 2008, self storage did great. The COVID, obviously self storage did really well. The challenge now is, do we see the housing market stay slow for a prolonged period of time with increased unemployment? God forbid we go into some type of a recession, as you and I have talked about with the Philip J. Anderson real estate cycle. Um, does it finally start to be a confluence of events where storage struggles to keep that level of occupancy and and rates that they've been able to sustain over really 40 years other than the last two? The last two being, a, you know, you have to factor in the incredible 61% spike during COVID. If you take that out and it just make an average from 2020 to 2025, the last two years were not really negative years in a in a five-year scheme. Chris Berg: Yeah. I mean, you know, there's so many things happening right now, it's hard to obviously say, but I think if you look at, there's obviously going to be a shrinking supply over the next 12, 24, 36 months, which bodes well for rates, right, in the asset class. I, it's so interesting because like I never want to pull for unemployment. So, let me be clear about that. I'm not suggesting, hey, you know, unemployment is good for the asset class. And yet if you look historically, unemployment's good for the asset class. So I don't want to see people unemployed. And yet, from a, as you're asking just specifically about self-storage, are there a confluence of events? Yeah. If unemployment rate starts to go up, there's going to be more movement, like I said, either people moving back in with parents, or there's more people within a household so I need more storage. So it typically, in historically speaking, is going to bode well for self storage. Thaddeus Campbell: It's interesting, right, that point that it's not necessarily moving from a home to another home you're buying for yourself. Moving out of an apartment and in with your parents is still a move as far as it goes for self-storage, right? Selling your house and moving in with your parents. Selling your house and and moving into an apartment to downsize your your whatever you're paying every month. All of those have traditionally been drivers of people renting. You had that graph up and I'm sorry I didn't give you a chance to to look at it. I was actually interested. That was the incentives that Lennar's been offering for people for— Chris Berg: Yeah. Let me share this with you, because again, another data point for you when you start to talk about the trends that we're seeing, whether in the housing market, the economy as a whole. You know, 13.3%. So this is the incentives percentage of revenue that Lennar is now offering to get these people to buy the homes. I think what's important for us to note is that it hasn't been this high since really, you know, Q4 of 2009. Um, Q1 2010. So, we all know that was the back, right? Thaddeus Campbell: Yeah. Chris Berg: So, point being is that, are there, and I and I again, I think what I hear from people, and I'm still fairly new to storage, but storage can be a pretty good preemptive indicator. So, when we see this uptick in demand, do I know it's due to more unemployment? I don't. But that's kind of my gut right now with the other data points that I'm seeing. And again, that does not bode well for the economy. Then you lay slower GDP growth according to the Fed, AI, you know, do you see this all of a sudden we go from 4 to 10? I don't think it's an overnight thing, but you know, there's guys from Perplexity and OpenAI, Sam Altman, that have talked about, hey, there's going to be a moment where you're going to kind of wake up and be like, wow, this thing just ate up a ton of jobs that I didn't even realize it was going to do. Thaddeus Campbell: Something that we've been talking about for a few years now is really starting to become a reality. We're we're starting to see it actually take hold. And and you know, it's it's fun every day to go on ChatGPT and have it help me with things associated with my job. The reality of having those resources and, and look, you know, I'm a capitalist at heart and I'm a libertarian, and and I guess I I always feel that stay ahead of the curve or or you're going to get eaten by it. Um, but for this, for the storage report, talking about what the effects are on storage, nice to have hit that inflection point where we're starting to go up again. Reason to believe that probably is going to, you know, I think we're both aligned on this thought even though I may be a little bit more conservative in my feelings than you are. Um, think we've hit that inflection point where, you know, we're we're bouncing up again in a direction that is, you know, positive for rates, positive for returns if you're invested in the REITs. Looking like storage has hit the bottom and and started to bounce back up again. Chris Berg: Yeah. Again, I don't think you see COVID type growth in the rates, but I think it's going to be much more consistent up. And if you, if you're going to look at it from a stock perspective, I do think this is, you know, me just being maybe somewhat hopeful, but there's going to be a new higher low um in that sort of December, January time frame, and then we can go up from there and start to see growth take place, which again, if you are a builder right now, I think is good because supply is contracting so much over the next supposedly 36 months. Thaddeus Campbell: Chris, as always, love it. People that are watching, if you're watching on the recording, note our new time. We are no longer at 3:30 on Thursdays. We're going to go live every Thursday at 1:00 Eastern. That is 10:00 a.m. Pacific, which I'm throwing in there for my left coast friend. Uh, we are excited to come every week and and share this stuff with you. We're we're talking back and forth almost on an almost daily basis about different data we're seeing and trying our best to provide a little bit of interpretation on that data. At the very least giving you one quick place where for 20 or 30 minutes a week you can see the data points that we've seen through the course of the week, hopefully get a little bit more education about what's going on in our asset class. You can see the link on the bottom of the screen if you want to subscribe to Chris's CR report, that takes you to his YouTube channel where you can subscribe to him. You, you'll see mine scroll across there as well. Chris is looking for land in California. So, if you're somebody who has access to a parcel of land that might be right for self-storage development, feel free to reach out to him. His email is going across the bottom of the screen as well. I'm looking for land nationwide. I'm not going to embar— uh uh what's the word I want to build. I'm not going to come over and and hedge in on his California land, anywhere other than California. I'm looking for 4 to, 4 to 10 acres. Feel free to shoot me an email and connect. As always, Chris, can I ask something though, man? Because you're really good at this. So I I want to ask you, what was your greatest takeaway out of the data points today? Chris Berg [attribution inferred]: My great— Thaddeus Campbell [attribution inferred]: Yeah, for sure. The greatest takeaways are that Philip J. Anderson's a genius, right? For those of you who haven't read The Secret Life of Real Estate and Banking, it is an absolute must-read for anyone who is either working or investing in anything to do with real estate. If you don't understand the real estate cycle, you're gonna get in trouble. It can be very, very pro—, uh, problematic for you. And so, you know, we've talked about the the Secret. You've had Philip J. Anderson on the CRA report, which still to this day blows my mind because very few people that I talked to have even heard of his book, let alone interviewed him. Um, but the the point being that the signs are there that we're coming into a downturn in the economy. I, I don't, it's going to be very very hard to avoid. You know, God forbid we go to war in the Middle East to to, you know, salve the economy. The only time the the real estate cycle did not hold true that Philip J. Anderson speaks about is the um the depression in the 1930s into World War II, because so many crazy things were going on. Hopefully we don't avoid a recession by going to war. Um, but the overall thing that I take out of this is that, you know, it, we're going to struggle to avoid a downturn in the economy, a downturn in the economy in the next couple years. You know, see it how you want, that's not necessarily a bad thing for the returns in self storage. Chris Berg: Well, I didn't think you were going to go there, but I'm glad you did. So, yeah, just for people out there, um, according to the thesis, you know, just be alert of what what is happening kind of mid-2026. And it's going to get easy to, I mean, with AI it's easy to get caught up on all the frothiness that's happening right now. Um, and if this thesis bears out to be true, and like you said, hopefully there's no war, just to let people know, um, just be conscious of what's going on in the middle of 2026 and pay attention. Thaddeus Campbell: 100%. Chris, as always, what a pleasure hanging out for a little while and share some information. We'll be back next week live Thursday at one o'clock on LinkedIn. You can see us at um the Self-Storage Report on YouTube as well. The link for that has been posted through the, through the course of the the live show. So, look forward to having you guys follow. Listen, reach out to us with any data points that you folks see that you think would be important to share with people that are into self storage and are interested in the asset class. We're, we would love to get that information from people and and love to mention it and mention you if you provide it for us um and and your thoughts. We're more than happy to pass that information along. Look forward to, host of the Stories Behind the Door. — END OF TRANSCRIPT —