Institutional capital remains active in the self-storage sector, but the criteria for acquisitions have evolved significantly since 2021. According to Tom de Jong, Executive Vice President at Colliers and founding principal of the De Jong Self Storage Team, buyers are no longer underwriting on hope. Instead, they are focusing on today's achieved rents, often with flat projections, and building their return case on actual property income rather than speculative growth.
This shift in underwriting standards has forced sellers to recalibrate. Properties that appeared strong in 2022 based on projected rent growth may not meet current benchmarks unless the in-place income already supports the valuation. De Jong, who has closed self-storage transactions in 32 states, notes that institutional buyers are now underwriting with a more realistic lens, emphasizing what a property is collecting today rather than what it might collect in the future.
Location criteria have also tightened, with buyers gravitating toward markets that offer high barriers to entry. Major cities like Los Angeles, Boston, and New York are attracting the most institutional attention, while Seattle and Portland have seen increased activity. Conversely, markets that experienced heavy new supply—such as Miami, Austin, Nashville, and Las Vegas—have seen institutional capital pull back. Buyers are wary of markets where new competition could undercut rents again and are closely monitoring planning pipelines for additional facilities.
A counterintuitive trend has emerged in pricing: mom-and-pop-operated facilities are drawing the most aggressive offers on a cap rate basis. De Jong explains that buyers see management upside in these properties, which may have been run informally without professional revenue management tools. Acquiring such a facility allows an institutional buyer to step in and improve performance quickly. In contrast, facilities that are already institutionally managed see less aggressive pricing, as there is less room for value-add through better management, making them more of a yield play.
Buyer behavior also varies depending on the capital bucket being deployed. Most large institutional buyers have multiple funds: core or core-plus funds targeting stabilized assets in established markets, and value-add or development funds willing to take on lease-up risk for higher returns. Which bucket a buyer draws from determines what they will consider, meaning the same buyer might pass on a deal for one fund and aggressively pursue it for another.
For sellers, the takeaway is clear: achieved income now carries more weight than pro forma projections. Properties with real, current cash flow in strong barrier-to-entry markets are seeing the most competitive interest, while those reliant on projected growth to justify their price face a tougher audience. As de Jong puts it, the market has shifted from growth to reality.
