Institutional capital remains active in the self-storage sector, but the criteria for acquisitions have shifted significantly from the 2021 market. Buyers are no longer underwriting on projected growth; instead, they focus on today's achieved rents, a change reshaping which markets, assets, and sellers secure deals. Tom de Jong, Executive Vice President at Colliers and founding principal of the De Jong Self Storage Team, has closed transactions in 32 states and observes this real-time rebuilding of institutional buy boxes.
Underwriting has moved from growth to reality. In 2021, buyers often projected five to seven percent annual rent growth and still hit return targets by year three. That math no longer works. De Jong says institutional buyers now underwrite at today's achieved rents, often with flat projections, building their return case on what a property actually collects rather than what it might collect. This change forces sellers to recalibrate; a property that appeared strong in 2022 based on projected rent growth may not clear the same bar today unless the in-place income supports it.
Location criteria are tightening around barriers to entry. Markets with the highest barriers—such as Los Angeles, Boston, and New York—are receiving the most institutional attention. Seattle has seen a recent uptick in transaction interest, and Portland remains consistently active. Conversely, markets that experienced heavy new supply, including Miami, Austin, Nashville, and Las Vegas, have seen institutional capital pull back. The pattern is consistent: buyers want markets where new competition is unlikely to undercut rents, and they monitor planning pipelines for new facilities.
Mom-and-pop assets are pulling the most aggressive cap rates. This disciplined underwriting has produced a counterintuitive pricing trend. De Jong notes that mom-and-pop-operated facilities see the most aggressive offers on a cap rate basis because buyers see management upside. Facilities run informally without professional management or revenue tools offer opportunities to improve performance quickly. Institutionally managed facilities, while well-run, have less room for value-add through management, so buyers treat them more as yield plays.
Multiple capital buckets mean multiple sets of rules. Most large institutional buyers operate with several funds: a core or core-plus fund focused on stabilized assets in established markets, and a value-add or development fund willing to take on lease-up risk for higher returns. Which bucket a buyer uses determines what they will consider; the same buyer might pass on a deal for one fund and pursue it aggressively for another.
For sellers, the practical takeaway is that achieved income now carries more weight than a pro forma. Properties with real, current cash flow in strong barrier-to-entry markets see the most competitive interest, while those relying on projected growth face a tougher audience. This article is based on information provided by the expert source cited above and is intended for general informational purposes only, not as legal, financial, or real estate advice.
