Institutional capital remains active in the self-storage sector, but the criteria for acquisitions have shifted significantly since 2021. Buyers are now underwriting based on today's achieved rents rather than projected growth, a change that is reshaping which markets, assets, and sellers succeed in closing deals. Tom de Jong, Executive Vice President at Colliers and founding principal of the De Jong Self Storage Team, has observed these trends firsthand, having closed transactions across 32 states.
Underwriting has moved from growth projections to reality-based assessments. In 2021, buyers often projected five to seven percent annual rent growth and still expected to meet return targets by year three. That approach no longer works. De Jong notes 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 potential future income. This shift forces sellers to recalibrate; a property that appeared attractive in 2022 based on projected rent growth may not meet current standards unless its in-place income already supports the price.
Location criteria are also tightening around barriers to entry. Markets with high barriers, such as Los Angeles, Boston, and New York, are drawing 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. Buyers prefer markets where new competition is unlikely to undercut rents and are closely monitoring planning pipelines for new facilities.
Interestingly, the most aggressive cap rates are appearing on mom-and-pop-operated facilities. De Jong explains that buyers see management upside in properties run informally without professional revenue tools. These facilities offer opportunities for buyers to step in and improve performance quickly. In contrast, institutionally managed facilities, which are already well-run, see less aggressive pricing as they offer limited room for value-add improvements and are treated more as yield plays.
Buyer behavior also varies depending on the capital bucket being used. Most large institutional buyers operate multiple funds, including core or core-plus funds targeting stabilized assets in established markets, and value-add or development funds willing to take on lease-up risk. Which bucket a buyer pulls from determines their criteria; the same buyer might pass on a deal for one fund and pursue it aggressively for another.
For sellers, the takeaway is clear: achieved income now outweighs pro forma projections. Properties with real, current cash flow in strong barrier-to-entry markets attract the most competitive interest, while those relying on projected growth face a tougher audience. This disciplined approach marks a departure from the market seen a few years ago, signaling a more cautious institutional buyer base.
