The self-storage industry is currently in a phase of stabilization, following a period of high demand and limited supply. While there are still opportunities available, the market is beginning to settle down.
However, this trend does not apply to tertiary markets.
According to a recent report by RentCafe, smaller metropolitan areas with populations under 2 million are experiencing an increase in demand due to limited supply. Yardi Market Analyst Maria Gatea explains that historically, self-storage development has focused on larger urban areas while neglecting smaller markets. As a result, these tertiary markets now face inventory shortages as demand continues to rise.
Gatea also notes that migration plays a significant role in driving demand for self-storage facilities in these smaller areas. Many people are attracted to the more affordable housing options and better work-life balance offered by tertiary markets compared to primary or secondary cities. For example, Springfield MA has seen an 11% population growth over the past decade while maintaining only 2.7 square feet of storage space per capita – leaving room for further development.
Other New England cities highlighted as potential growth centers include Providence-Warwick RI-MA and Worcester MA-CT MSAs; Honolulu; Boulder CO; Greeley CO; Chandler AZ – all facing undersupplied inventory levels accordingtothe report.
In contrast,the South region boasts ample availabilityofself-storagespace.However,Gateapointsoutthattherearesomeareaswithuntappedpotential,suchasMcAllen,TX.Whilethiscityhasseenan8 .9%increaseinpopulationoverthepastdecade,itcurrentlyonlyoffers6 .5squarefeetofstoragepercapita .
Gatea believes that there is significant potential for further development in these underserved tertiarymarketswhereincreaseddemandmeetslimitedsupplyanddiverse sourcesoftargetcustomers.Shealsoemphasizesthatthesectorcontinuesto evolve,andit’simportanttounderstandthedemanddriversandclientbase,aswellastheexistingstockinamarket,beforeinvestinginfurtherdevelopment.”Consideringallfactors,includingtraditionalandemergingdemanddrivers,maybethekeyto capitalizingontheongoingpositivefundamentalsoftheself-storageindustry,” Gateaconcluded.
The article titled “Self-Storage’s Next Frontier: Tertiary Markets” was originally published on Connect CRE.
