2025 Self-Storage Outlook: 12 Industry Experts Sound Off

In 1992, Clinton strategist James Carville coined the phrase “It’s the economy, stupid!” and the media latched onto it like he was some sort of political Plato. Those four words, part of a broader message to keep the campaign focused on issues voters cared about at the time, then became part of our everyday vernacular. 

In the years since, that phrase has remained shorthand for the idea that economic issues tend to dominate voter priorities, which the 2024 election proved once again. So how does the economy impact self-storage? The 12 industry experts who we gathered for our 2025 Self-Storage Outlook count the ways. [Interviews took place Dec. 4-23, 2024]

ARMAND AGHADJANIANS, Director of Acquisitions, Store Here 
JIM CHISWELL, Managing Partner, Chiswell & Associates 
NEAL GUSSIS, Executive Director, Strat Property Management
SHAWN HILL, Principal & Founding Member, The BSC Group 
JASON KOONIN, CEO, Sunbird Management Group 
DIXON PITT, Director of Real Estate, Williams Development Group
JOE SHOEN, President & Chairman, U-Haul  
CHRIS SONNE, Executive Vice President, Newmark
CARL TOUHEY, Self Storage Specialist, Performance Self Storage Group 
BEN VESTAL, President, Argus Self Storage Advisors 
TAYLOR WILLIAMS, Co-Founder, Williams Development Group 
MORGAN WINDBIEL, Senior VP, CBRE Self Storage Advisory Group

On the campaign trail, Trump laid out a series of broad ideas for 2025 designed to provide tax relief, cut prices, and hike tariffs, and ultimately, he said, “strengthen the economy.” How confident are you feeling?

CHISWELL: The Trump administration is certain to produce some dramatic ripples this year, and the big test will be how fast their efforts can contribute to lowering the day-to-day cost of living for families. A growing confidence level with positive changes will help to get people motivated to start buying homes again and we’ll see a jump in rentals.

GUSSIS: Even if the Fed reduces rates further, mortgage rates won’t necessarily go down. The rates are based on treasuries, and those have to go down too. So while the Fed lowered the benchmark, a 30 year mortgage is still 7.2 percent. If treasuries stay where they’re at, rates will stay where they’re at.

HILL: The primary issue with the housing market currently is one of affordability, and rate is just one component of that equation. There’s inventory, wage growth, and other costs of home ownership like real estate taxes and insurance. As we sit here today, housing prices remain elevated, and while taxes and insurance seem to have paced with inflation, wage growth has not. Certainly if we see rates moderate that should help stimulate the housing market, but because of these other factors it may take longer than people are expecting for affordability to resolve.

AGHADJANIANS: I do think there’s a strong case to be made that the slowdown in home sales has converted some temporary renters into long-term renters…they’re tolerating higher ECRIs for convenience under current low introductory rate structures.

Although self-storage construction levels are high, the majority of builds began several years ago. Once these facilities come to fruition, fewer sites are expected to be built with new deliveries to continue moving at a slower pace. Does this ring true for you?

KOONIN: There might be a little bit of a lull for the next year or so. But the interest rates coming down, buzz in terms of the election being good for real estate investing with less regulation…people are feeling more confident. I think you're going to see a bunch of capital come into the market, push the supply back up, especially come the end of the year and into 2026.

WILLIAMS: Yes, rates are going down, but they're not going back to where they were 48 months ago. And then we’re also getting headwinds and some pushback from local municipalities as well on entitlement, permitting, and zoning. We’re just kind of at a saturation point, and there’s fewer really good parcels available. So things have probably gotten back to more of a normalization rather than the previous feeding frenzy.

VESTAL: There is oversupply in some markets, but I’d also say we’re at an equilibrium. As far as projects being tabled, I believe they simply don’t pencil due to operational headwinds. I’ve got 25 sites right now and they’re shovel ready, but they’re not selling because the cost of capital, planning, and entitlement are elevated. 

SONNE: I expect an increased transaction volume due to a slow trend of lower interest rates in 2025. But, it’s going to be a 5x10 kind of year, an improvement over the past two years' 5x5 performance, but not as strong as the 10x10 years of 2021-22. Cash flow will continue to increase above the rate of inflation, and cap rates are showing a slow trend of compression.

There has been a lot of talk around aggressive ECRIs and their impact on occupancy, NOI, and industry perception. How do you see this playing out in 2025?

AGHADJANIANS: These discounting and pricing strategies have certainly created some market turbulence, but I believe 2025 will bring clarity as we better understand what works, how, and when. 

TOUHEY: Customers may tolerate ECRIs but they’ll hurt some operators, especially a guy who's a bit over leveraged. If a tenant moves out paying $150 and you bring in new tenants at $110, your income just went down more than 25 percent. So you're filtering out those that were paying higher and just bringing in those that are paying less.

WINDBIEL: Right now, we're seeing slower lease ups, but we're also seeing slower new tenant churn. I think a lot of it purely comes down to the ECRI play, which the REITs have shown can be successful. But the real question is how quickly do we get those physical occupancy levels to the place that we need it to be? 

SONNE: Although I predict physical occupancy to remain relatively flat, ECRI’s will continue – albeit with more muted increases. 

CHISWELL: Unless they have a facility in lease-up, many folks have probably never had occupancy levels lower than 80% in the past five years. Many operators, like the REITs, have actually not been below 90% physical occupancy during that same period.This gives our industry a very healthy financial performance profile that continues to attract new investors.

KOONIN: Commercial business may be a way to make up for any shortage of tenants. When the capital gains and federal corporate tax rate decreases, businesses start popping up because more money is being put back into the economy. 

PITT: I agree, I think we’ll continue to see more folks renting storage for business use. Like a medical device sales rep, for instance, or e-commerce people that are shipping and receiving a lot of goods. More facilities might want to carve out space where a tenant can sit down and knock out administrative work.

The self-storage industry faced higher levels of uncertainty in 2024, in part because of elevated interest rates, high inflation, and recession fears. With interest rates slowly coming down, do you expect an upswing in investing and loan approvals?

HILL: Liquidity for self-storage mortgage capital was robust throughout 2024 and I expect that will remain so in 2025 barring some unforeseen black swan event that shakes up the capital markets. The primary constraint over the past year has been the cost of capital, not the availability of it.

VESTAL: Lenders are going to work with stabilized properties first, properties in lease up second, those that are 30-50 percent occupied third, and those with a certificate of occupancy fourth. New construction debt? That’s dead last on their list.

GUSSIS: But lenders like self storage, and underwriting and loan dollars are driven by historical performance. The challenge today is street rates vs. ECRIs.

KOONIN: Because of the low street rate/high ECRI tactics – and it remains to be seen how effective those will be – less experienced developers are not going to be able to get deals to pencil right. And, I'm not sure how receptive banks are to giving a developer underwriting when they say, “Hey, I can only get $75 today, but I promise I'll get this unit to $200 soon.” I mean, are they really going to finance the property with that kind of speculation? I don’t think so.

HILL: Despite the Fed’s efforts to stimulate economic activity by lowering the fed funds rate, the benchmark treasury indexes have remained stubbornly elevated and, in fact, are moving in the opposite direction that many investors have been hoping for. Consider that in September 2024, prior to the first rate cut, the 10-year treasury was around 3.65 percent. Despite two rate cuts totaling 75 basis points in the fall, the 10-year treasury currently sits in the low 4’s (4.15 percent as of 12/7). So even though the cost of borrowing short term capital is decreasing, the cost of capital for many investors remains elevated, making it difficult for investors to pencil deals.  

Will the playing field be level between large and small operators, REITs and independents? Or does the advantage in current and future market conditions continue to favor the big guys? 

GUSSIS: Larger operators have more experience and generally greater financial strength and ability to create larger lender relationships. This all helps for gaining access to capital – and cheaper capital.

KOONIN: Many banks are capital constrained, and construction loans are risky for them because they have to get hold of extra capital for them. So unless you're a really strong institutional player or you have a big balance sheet, you will struggle to get financing.

WILLIAMS: I would even go further than that. I mean, if you’re a small operator or a first time developer, you’ll be lucky to even get in the front door. 

WINDBIEL: Until there’s a change in the way self-storage is underwritten, it’ll be very difficult for Mom and Pops to buy stabilized deals. I still think that they can develop, but it’s about finding sites where there's not a lot of competition, or finding off-market deals where they can get a significantly better price. 

HILL: We have seen interest from every type of lender including banks, credit unions, life companies, CMBS, the SBA, and private capital, and capital has been available to both large and small operators and for almost every type of transaction, including construction. 

AGHADJANIANS: We expect intense competition for acquisitions fueled by significant undeployed capital. We’re gearing up for more of that activity. 

GUSSIS: I think ultimately everyone in the industry should expect continued consolidation as larger operators will simply be able to squeeze more returns out of a facility versus the little guys.

Transaction pricing has been relatively flat, but with self-storage’s primary return drivers expected to be on the upswing in the future, they could increase sharply. So, is now a good time to buy? Conversely, is it a good time to build, with the expectation that the market will be in better shape by the time the project is delivered?

GUSSIS: To build a facility from inception to stabilization is likely a 3-5 year process, so there are plenty of operators weighing out whether it makes sense. But, it’s certainly much harder to be a developer today than it was 5-10 years ago because of the approvals needed, construction costs, current interest rates, current supply, current market rates, and a more sophisticated operating environment. 

VESTAL: If you have a balance sheet and the stomach to landbank, then now is a good time to buy; it’ll certainly be cheaper than 12-24 months down the road. 

HILL: I am not a huge proponent of trying to time the market when building. Rather, I think the most prudent course of action is to analyze each deal on its own merits. Investors who do their homework and identify assets that are fundamentally sound will be rewarded. 

KOONIN: There's so many different factors: There are fewer good sites available, city moratoriums, higher taxes... In coastal regions, you’ve got insane hazard insurance, it’s like $100K right there. All of this is going to make some new projects difficult to greenlight. 

PITT: If you want to build, you should be tracking zip codes to see where new subdivisions are planned. You want to be skating not to where the puck is, but where it's going to be. I would also recommend being disciplined and not compromising on a site. That’s our mentality or methodology: We’d rather have three class A sites than 10 class B sites.

WINDBIEL: On some of my most recent deals, I've received the same amount of interest that I did back in 2021-22. I'm not saying the values are back to those levels, but from an interesting perspective, it’s there. I'm getting 20+ offers on deals again that are physically stabilized.

CHISWELL: I would caution anyone looking to develop a new facility or convert a vacant building to storage to be realistic in their assumptions in the year ahead.  The value of any storage business can be enhanced by simply capitalizing their NOI with a lower cap rate. A facility with a $250K NOI, for example, appears to have a value of $5M at a 5 percent cap rate, but only a value of $3,571,428 at a 7 percent cap rate – a 40 percent swing in valuation. All I’m suggesting is to be realistic as you pro forma your development projects in 2025. 

WINDBIEL: Agreed. Construction costs and interest rates are up, and rental rates are down due to the REIT pricing strategies. So if you tried to build a pro forma on those three issues, you're going to have very few that truly pencil, at least to the level that so many developers need them to. My money tells me that right now there’s a lot of risk to develop. 

SHOEN: Development is expensive, construction costs are up, zoning can be difficult. But you’ve got to work through these things one at a time. Dial some of those construction costs back if you can, for example. Just keep working at it until it makes sense. 

GUSSIS: Storage has proven to be resilient with diverse demand drivers which is why it’s seen by many as the superior commercial real estate type. As a whole, I think you can expect values to increase at appreciable rates of return. However investing is all property and location specific and management capability is becoming even a bigger factor in assessing potential investment returns. 

Should those sitting on properties stay put, or unload them with the hope of getting their investment back? Is now a good time to sell?

TOUHEY: The guys that are finding themselves in trouble who are looking to sell typically built too much and didn't have the liquidity, net worth, and credit. 

GUSSIS: There will also be some that want to get out because the investment assumptions didn’t pan out and they can still get out whole or making a few bucks. Also if the interest rate environment seems to be stable, that should help set the market and buyers and sellers could get closer on bid/ask prices. Of course, if conditions don’t improve and owners continue to see flat or decreasing operating returns, that could cause some players to sell too. 

VESTAL: I know of 30+ projects that are delayed. They bought the land, went through entitlement, and got city approvals. But because of the cost of construction debt, some are choosing to sell. Some owners of existing properties are selling too. They’re not getting the rents they want, and they’re not going to put any more effort into it.

TOUHEY: It's going to be a good year for the guys selling. I'll just pick deals that are like $10M+ because they will still command, say, a five percent cap rate today. So if the 10 year T-bill is 4-point and a group can buy a deal and get 5.3 percent, it'll work. And they're paying cash. But if it's a $3M dollar deal with a five percent cap rate, well you can't buy a deal and put 30 percent down and buy a five percent cap rate because the debt will be six percent  and you’ll be writing a check every month to own that property.

VESTAL: It’s important to remember though that there’s $27B in self storage debt out there, and only $22M in default. This is still a great asset class with low default rates. Yeah, you may not hit your pro formas like you wanted, and there may be some stress, but there’s not much distress. Most people aren’t losing their properties or foreclosing. This isn’t a commercial office space situation. It’s a bump in the road. If you don’t have to sell, don’t. The value of your investment will be greater later.

WINDBIEL: I’ve seen more people just waiting to build until the self-storage market gets a little bit better. They’re not selling or abandoning properties, they’ve just put the projects on hold.

Roundtable Wrap-up

Thank you to everyone who participated for your time and insights. To conclude, we’ll give the last word to two of the most seasoned self-storage experts on our roundtable.

CHISWELL: I am optimistic looking at my crystal ball for the year ahead. With the right due diligence homework, the storage industry continues to be one of the best entrepreneur ventures to consider.  

SHOEN: I’m bullish on self-storage, and I encourage anyone who wants to build to do it. And you can expect a call from us to see if you want to become a U-Haul dealer! 

That’s a wrap – see you at the 2026 roundtable!

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Brad Hadfield is the MSM web manager and a news writer.