The self-storage industry reached an inflection point in 2025. September marked the first year-over-year rental rate increase in nearly three years. After a challenging post-pandemic correction, fundamentals are stabilizing. Major REITs raised guidance for two consecutive quarters. Occupancy has steadied across portfolios. Regional performance remains divergent, with Sun Belt markets like Atlanta and Phoenix continuing to absorb elevated inventory while gateway cities including Washington D.C. and Chicago outperform. The industry enters 2026 with cautious optimism, supported by improving rate trends but facing persistent headwinds from elevated interest rates, property tax increases, and housing market stagnation.

Construction’s Bright Spot

The construction sector emerged as a standout in the 2025 labor market, adding jobs while other sectors announced historic layoffs. According to the Bureau of Labor Statistics Employment Situation Summary released December 16, 2025, construction added 28,000 jobs in November 2025 when total nonfarm payroll employment changed little at just 64,000. Nonresidential specialty trade contractors drove gains with 19,000 jobs, representing 68% of construction's November increase.

This performance contrasts sharply with economy-wide layoffs. Challenger, Gray and Christmas reported 1.17 million job cuts announced through November 2025. This represents a 54% increase from the same period in 2024 and the highest level since the 2020 pandemic. Federal government employment fell by 271,000 since January 2025.

The construction sector faces persistent labor shortages despite strong employment. Associated Builders and Contractors projects the industry needs 439,000 net new workers in 2025 and 499,000 in 2026.

Market Fundamentals Show Recovery

The U.S. self-storage market, valued at approximately $45.4 billion according to Mordor Intelligence, demonstrated stabilization across key metrics in 2025. The industry now spans more than 2.1 billion square feet of space nationwide according to StorageCafe.

National occupancy rates among major REITs ranged from 84.5% to 94.1% in the third quarter. Extra Space Storage led at 93.7% ending occupancy (up 30 basis points year-over-year) and SmartStop Self Storage averaged 92.6% (up 40 basis points). CubeSmart and National Storage Affiliates reported softer performance at 89.9% and 84.5% respectively, reflecting continued pressure in certain markets.

Rental rate recovery gained momentum through the year. Yardi Matrix reported that October 2025 advertised rates rose 0.7% year-over-year. This represents the first sustained positive growth after nearly three years of declines. September 2025 was the first month of incremental growth, signaling what analysts describe as a turning point for the industry. The national average 10x10 non-climate-controlled unit rented for $120 per month, while climate-controlled units averaged $136 per month according to StorageCafe.

Extra Space Storage reported new-customer rate growth exceeding 3% year-over-year net of discounts in Q3, with October rates up approximately 5%.

Supply moderation is supporting this recovery. The pipeline under construction fell to 2.6% of existing inventory by October 2025 according to Yardi Matrix, creating what analysts describe as a strategic window for operators to focus on existing facility optimization and renovation.

Construction Financing Remains Constrained

The self-storage construction financing environment in 2025 was characterized by tight lending conditions. Regional banks, historically major providers of self-storage debt, pulled back substantially. Many required full recourse or imposed onerous depository relationship requirements relative to loan amounts. The share of loans originated by banks dropped to less than half the market by 2024, according to Multi-Housing News.

Three Federal Reserve rate cuts in late 2025 (September through December) brought the benchmark rate down, but project economics remained challenging. Active lenders in 2025 included specialized self-storage lenders like Live Oak Bank and debt funds including Affinius Capital, Axonic Capital, ORIX, and Canyon Partners.

The Crittenden Report (November 2025) expects lending for self storage to pick up as capital markets improve, noting that banks are back competing for new transactions and lenders appreciate the sector's low default rates.

The Door Replacement Opportunity

The self-storage door replacement market represents a significant opportunity driven by aging facility stock. With more than 52,000 facilities and 2.1 billion square feet of inventory nationwide according to industry data, the aging infrastructure creates sustained renovation demand.

Green Street Advisors research found that facilities undergoing comprehensive door replacement and renovation raised rents 2.5 times faster than facilities without such upgrades..

Door replacement offers operators multiple benefits beyond rental rate increases. These include improved security, reduced break-in risk, enhanced curb appeal, potential insurance premium reductions, and depreciation benefits through cost segregation strategies.

First and second generation facilities characterized as single-story with limited amenities, no HVAC, and basic security comprise a substantial portion of the install base. Third generation facilities with multi-story designs, climate control, and modern technology command rental premiums over older properties, incentivizing upgrades.

Operators Face Rising Costs and Regional Divergence

Self-storage operators confront several challenges as they enter 2026, with performance varying dramatically by market. The most supply-heavy markets by construction-as-percentage-of-inventory include Sarasota-Cape Coral, Florida at 9.2%, Phoenix at 6.8%, and Las Vegas at 6.6%, according to Yardi Matrix.

Regional performance divergence is stark. Sun Belt markets that benefited from pandemic-era migration now work through elevated inventory levels. Meanwhile, urban gateway cities are outperforming. Washington D.C. became one of the first metros to post positive year-over-year rent growth, while Chicago, New York MSA, San Jose, and Seattle benefit from limited supply growth.

Rising operating costs pressure margins significantly. CubeSmart reported same-store operating expenses rose in Q3 2025, though the company noted favorable variances in utilities and insurance following a successful renewal. National Storage Affiliates reported expenses rose 4.9% in Q3, driven by property taxes, utilities, and increased marketing investment according to SkyView Advisors.

The Storable 2026 Industry Outlook survey of approximately 500 operators found 31% cite competition from new market entrants as their top concern. This surpasses REITs and corporate investors for the first time.

Housing market stagnation creates an additional headwind. National Storage Affiliates noted U.S. housing turnover has fallen to among its lowest levels in decades, impacting storage demand tied to residential moves.

What This Means for 2026

The operators who win in 2026 will be those who act on the current market conditions rather than wait for them to improve further. With rental rates finally turning positive and supply pressure easing, the window to capture pricing power is opening. Operators in gateway cities should move aggressively on rate optimization. Those in Sun Belt markets should focus on occupancy stabilization and operational efficiency to weather the remaining supply absorption.

Facility renovation deserves serious capital allocation consideration right now. The Green Street Advisors research showing 2.5x faster rent growth for renovated facilities points to a clear competitive advantage. Aging doors, outdated hallway systems, and deferred maintenance are no longer acceptable trade-offs when competitors are upgrading and commanding premiums. The math favors investment over waiting.

The construction sector's resilience signals that commercial building activity remains strong despite broader economic headwinds. For operators planning expansions or renovations, the labor market supports project execution. The 28,000 construction jobs added in November while other sectors contracted demonstrates that skilled trades remain available and active.

Rising operating costs are not going away. Property taxes and insurance will continue to pressure margins in 2026. The operators who offset these increases through strategic capital improvements and rental rate gains will outperform those who absorb the costs without action. Two-thirds of operators express optimism about 2026 according to Storable's survey. The question is whether that optimism translates into execution.

Sources

Bureau of Labor Statistics, Employment Situation Summary, December 16, 2025 (USDL-25-1581)

Challenger, Gray and Christmas, Job Cut Announcement Report, November 2025

Associated Builders and Contractors, Construction Industry Workforce Needs Report, January 2025

Mordor Intelligence, United States Self-Storage Market Report, 2025

StorageCafe, Self Storage Industry Statistics, October 2025

Yardi Matrix, National Self Storage Market Outlook, November 2025

Extra Space Storage Inc., Q3 2025 Earnings Report, October 2025

CubeSmart, Q3 2025 Earnings Report, October 2025

National Storage Affiliates Trust, Q3 2025 Earnings Report, October 2025

SmartStop Self Storage, Q3 2025 Earnings Report, October 2025

SkyView Advisors, Q3 2025 Self-Storage Industry Report, November 2025

Storable, 2026 Self-Storage Industry Outlook, November 2025

Multi-Housing News, Self Storage Lending Report, 2025

The Crittenden Report, Self Storage Lending Outlook, November 2025

Green Street Advisors, Self-Storage Performance Study

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