Dream Storage Newsletter - January 2024

Monthly Newsletter

As we kick off 2024, we share our insights on the state of the self-storage industry and our expectations for the year.

Market Insights

Chris and Rachel have dedicated the initial month of 2024 to connecting with their longstanding industry relationships. While lenders express a keen interest in re-entering the self-storage market, a prevailing sentiment among deal brokers suggests an anticipation of increased on-market transactions in the latter half of the year. Many brokers attribute the earlier 2024 pause to two primary factors.

Firstly, numerous sellers, emboldened by the Federal Reserve's December announcement, have grown optimistic about a continued decline in interest rates throughout the year. This optimism has led them to anticipate higher asking prices in Q3 and Q4. Secondly, at the guidance of brokers, many sellers are banking on a robust Spring leasing season to enhance occupancy and rates before bringing a deal to the market.

As highlighted in our December newsletter, nationwide street rates (i.e., asking rental rates) have experienced a decline, with REITs at the forefront of this trend. REITs emphasize their ability to attract new clients by offering low street rates, only to subsequently increase in-place rental rates as early as three months into a customer's new lease. While this approach has historically favored the self-storage industry, it now poses challenges for mom-and-pop owners attempting to compete with REITs leveraging sophisticated pricing algorithms. Moreover, the reduced street rates have compelled buyers to adjust their rental rate expectations when forecasting revenue. The potential uptick in street rates during the upcoming Spring season will offer valuable insights for both buyers and sellers.

Dream Storage’s Outlook

In response to these market dynamics, Chris and Rachel have strategically focused on sourcing off-market opportunities. Leveraging strong relationships with brokers, they frequently gain access to deals not yet presented to the general market. Additionally, the team has proactively reached out to owners directly. Despite the prevailing trends, Chris and Rachel remain optimistic about securing deals in the first half of the year. They are committed to exploring both on-market deals and off-market opportunities that align with their stringent buying criteria.

We look forward to 2024 and appreciate your continued interest.

The Dream Team