Higher interest rates and debt costs are leading to a slowdown in investment sales activity in the self-storage REITs sector, WealthManagement.com reported.
Rents are record high and there is a strong demand for self-storage units, but fewer deals are happening in the self-storage properties space, the Sep. 21 report said.
Self-storage investors mostly rely on loans to leverage while making purchases. Higher interest rates cut into the yield on their potential investments, according to the report.
The high rents are unlikely to be undercut, on average, by competition from new properties, Yardi Matrix, market intelligence services provider for commercial real estate, reportedly forecasted.
The new supplies delivered in the year will be equal to 3.2% of the existing inventory, and the annual deliveries will moderate to 2.5% of the total stock by 2027, according to the forecast.
Investors are reportedly choosing self-storage properties as they seem to be able to weather the potential macro challenges.
“Once there is clarity with interest rates, we expect numerous bidders to be active,” Noah Mehrkam, CEO of the self storage management company, Self Storage Plus, reportedly said.