Institutional capital remains active in the self-storage sector, but the criteria for what qualifies as a viable deal have changed significantly since 2021, according to Tom de Jong, Executive Vice President at Colliers and founding principal of the De Jong Self Storage Team. With self-storage transactions closed in 32 states, de Jong has observed a real-time rebuilding of institutional buy boxes that now favor reality over projections.
Underwriting has shifted from growth assumptions to current performance. In 2021, buyers would underwrite five to seven percent annual rent growth and still hit return targets by year three. That approach no longer works. De Jong explains that institutional buyers now underwrite at today's achieved rents, often with flat projections, building their return case on what a property is actually collecting rather than what it might collect someday. This change has forced sellers to recalibrate: a property that looked like a strong sale in 2022 based on projected rent growth may not clear the same bar today unless the in-place income already supports it.
Location criteria are tightening around barriers to entry. The biggest markets with the highest barriers to entry—such as Los Angeles, Boston, and New York—are receiving the most institutional attention, according to de Jong. Seattle has seen a recent uptick in transaction interest, and Portland has been 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 again, and they are paying close attention to whether a market has multiple new facilities still in the planning pipeline.
Mom-and-pop-operated facilities are pulling the most aggressive cap rates. De Jong notes that these facilities are seeing the most aggressive offers on a cap rate basis because buyers see management upside. A facility that has been run informally for years, without professional or institutional management or revenue tools, represents an opportunity for a buyer to step in and improve performance quickly. Facilities that are already institutionally managed do not see the same aggressive pricing; they are well run, but there is less room to add value through better management, so buyers treat them more as yield plays than upside plays.
Multiple capital buckets within institutions mean multiple sets of rules. De Jong points out that most large institutional buyers are not working from a single playbook. They typically have 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 a higher return. Which bucket a buyer is pulling from determines what they will and will not consider, so the same buyer might pass on a deal for one fund and pursue it aggressively for another.
For owners considering a sale, 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 are seeing the most competitive interest, while properties leaning on projected growth to justify their price are facing a tougher audience. This shift to disciplined underwriting marks a significant change from the market a few years ago and is reshaping which assets and sellers get deals done.
