Institutional capital continues to pursue self-storage investments, but the criteria for acquisitions have shifted significantly since 2021. Buyers are no longer relying on optimistic projections; they are underwriting based on current performance. This change is reshaping which markets, assets, and sellers succeed in closing deals, according to Tom de Jong, Executive Vice President at Colliers and founding principal of the De Jong Self Storage Team, who has closed transactions in 32 states.
The most notable change is in underwriting methodology. In 2021, buyers would project five to seven percent annual rent growth and still achieve their return targets by year three. That approach no longer works. De Jong explains that institutional buyers now underwrite based on today’s achieved rents, often with flat projections, and build their return case on what a property is actually collecting rather than its potential. This shift has forced sellers to recalibrate. A property that appeared to be a strong sale in 2022 based on projected rent growth may not meet the same standards today unless its in-place income already supports the valuation.
Location criteria are also tightening around barriers to entry. Markets with the highest barriers, such as Los Angeles, Boston, and New York, are receiving the most institutional attention. Seattle has seen a recent uptick in transaction interest, and Portland remains consistently active. Conversely, markets with heavy new supply—including Miami, Austin, Nashville, and Las Vegas—have seen institutional capital pull back. Buyers now prioritize markets where new competition is unlikely to undercut rents, and they closely monitor whether a market has multiple new facilities still in the planning pipeline.
A counterintuitive trend in pricing has emerged: mom-and-pop-operated facilities are attracting the most aggressive offers on a cap rate basis. De Jong notes that buyers see management upside in these assets. Facilities run informally for years, without professional management or revenue optimization tools, offer opportunities for buyers to step in and improve performance quickly. In contrast, institutionally managed facilities do not see the same aggressive pricing because there is less room to add value through better management; they are treated more as yield plays than upside plays.
Buyer behavior also varies depending on the capital bucket used. Most large institutional buyers operate multiple 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 higher returns. Which bucket is used determines what buyers will consider. The same buyer might pass on a deal for one fund and pursue it aggressively for another.
These shifts point to a more disciplined institutional buyer base. For owners considering a sale, the key 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 those relying on projected growth to justify their price face a tougher audience.
This article is based on information provided by the expert source cited above. It is intended for general informational purposes only and does not constitute legal, financial, or real estate advice. Readers should conduct their own research and consult qualified professionals before making any real estate or financial decisions.
