Does Lower Market Saturation (SF/C) Lead To Higher Storage Rates?

Self-storage demand can feel like an unsolvable puzzle. But what if the key lies in one metric (square foot per capita [SF/C]) and its connection to street rates? Spoiler alert: It’s fascinating. I dove into 225 of the top MSAs in the U.S. to see how SF/C correlates with 10-by-10 non-climate-controlled (NCC) street rates (PSF) from November 2024. The results may surprise you. 

At first glance, there seems to be only a modest trend, that as SF/C increases, street rates drop. But it’s nothing particularly noteworthy, as the data looks fairly noisy. 

But, if we zoom in on the MSAs with SF/C below 8, we see a clearly decreasing rate PSF as SF/C increases. 

Now, that leaves us with the markets where SF/C is above 8. Here, there is no discernable relationship between SF/C and rate as rates are relatively low across the board compared to the prior set. 

But this is only interesting if you can use it to inform how you think about deals. So, let’s dive into how to apply it. 

The Basics: SF/C Vs. Street Rates 

It’s no surprise that as market saturation increases, street rates fall. More supply means more competition, which shifts pricing power to customers. 

Take Miami, Fla., for example: 

SF/C: 6.38 

10-by-10 NCC Rate: $1.83 PSF 

Now compare that to Denver, Colo.: 

SF/C: 7.17 

10-by-10 NCC Rate: $1.43 PSF 

Miami’s 11 percent lower saturation allows operators to charge approximately 28 percent higher rates than Denver. It’s all about the balance of supply and demand. There is a caveat here that although there was a clear relationship, SF/C can’t be used in isolation to predict what pricing will be (i.e., the correlation was meaningful, but it was not 100 percent). 

So far, so good. But what happens when SF/C climbs above 8? 

Above 8 SF/C: The Flatline Effect 

Here’s where things get interesting. When we look at markets with SF/C above 8, the relationship between saturation and rates just … stops. Rates stabilize, and other factors start calling the shots. 

For example: 

Riverside-San Bernardino, Calif.: SF/C of 14.71, $1.61 PSF 

San Antonio, Texas: SF/C of 10.39, $1.01 PSF 

Riverside’s saturation is 41 percent higher, but rates are 60 percent higher than in San Antonio. What gives? Once saturation crosses 8, factors like median income, housing starts, and economic growth become the real drivers. SF/C isn’t the whole story. 

8 Is The New 10 

For years, the industry treated 10 SF/C as the line in the stand-in for oversaturation. But the data says otherwise. The tipping point is actually 8 SF/C. 

Below 8, the trend is clear: lower SF/C equal higher rates. But above 8, SF/C loses its grip on pricing power. That shift fundamentally changes how we should evaluate opportunities, especially in higher-saturation markets. 

Context Is Everything: Beyond SF/C 

SF/C is a great starting point, but it’s not the finish line. In oversupplied markets, the real story often lies in the context. Here’s what to watch: 

1. Population Growth - Markets with strong population growth can handle higher saturation. Phoenix, Ariz., (SF/C: 7.28) is consistently one of the top 10 fastest growing cities, so despite a somewhat elevated SF/C today, the incoming demand may make this opportunity attractive over the next several years. One way to figure out where population will grow is the census and the various lists, but if you want to understand at the root level, look at residential development in the area (e.g. multifamily housing starts) to get a true picture of what migration the city can even support. Of course, if you’re banking on future demand, don’t forget to check out if new storage projects are in development in the area.
   
   
2. Economic Drivers - A diverse, stable economy can offset high SF/C. Seattle, W, (SF/C: 6.23) hits $1.70 PSF thanks to strong incomes and consistent job growth. Even in the more saturated outskirts of Seattle, like Bellingham, Wash., (SF/C: 8.51) rates are still $1.86 PSF thanks to proximity to Seattle’s strong economy. The classic way to look at this is by median household income. This can be a great indicator (and perhaps will be the subject of next month’s issue).
   
   
3. Commercial Development - Large infrastructure and commercial investments can also be a leading indicator that a market may be poised for growth (and perhaps increasing rates). Look for investments in name brands, and especially those that draw business renters (e.g. Home Depot, Lowes), as they can show the area may soon experience a rising income level.

What This Means For Investors 

If you’re making bets in self-storage, here’s your new playbook: 

Don’t Overreact To High Saturation - A market with 15 SF/C isn’t automatically doomed. If population growth and housing starts look solid, it could still outperform. Do your research on all the secondary factors above. 

Use SF/C As A Compass, Not A Map - SF/C is a great directional tool, but it’s just one piece of the puzzle. Pair it with other data points for the full picture. 

Drill Down Locally - Not all submarkets are created equal. Houston, Texas, (SF/C: 10.8) has pockets of low saturation where street rates skyrocket. Always go deeper than the MSA-level data. 

Wrapping It Up 

So, does lower market saturation lead to higher storage rates? The answer is: It depends. Below 8 SF/C, the relationship is solid. But above that, it’s a different game entirely. 

Self-storage isn’t just about the numbers. It’s about the story the data tells. A high-saturation market with strong fundamentals can still crush a low-saturation market with weak drivers. As the saying goes, “Data doesn’t lie, but it doesn’t tell the whole truth either.” 

Do you want to see how your market stacks up? Here are the top 50 MSAs (by population) from November 2024; reach out to support@tractiq.com to get the full list of 225. 

–

Noah Starr is CEO at TractIQ.