Self Storage Development Beat: Dallas Takes Top Spot Nationally For New Construction Over The Past Decade

Real estate has been booming over the past decade, and self storage is no exception. In fact, according to a recent report from StorageCafe, self storage emerged as one of the most dynamic sectors of the real estate market.

In the past 10 years, the 50 biggest US metro areas constructed almost 300M square feet of new self storage space, confirming the sector’s resilience and versatility. After navigating the first years of the decade rather timidly, still under the effects of the Great Recession, the self storage sector picked up the pace, delivering almost 54 million square feet of space in 2018, the best year of the decade for new self storage construction.

With many of the primary markets well supplied with storage space, construction activity slowed down by the end of the decade in an effort to restore the balance between supply and demand. However, the pace of new construction remains solid, with almost 46 million square feet of space delivered in 2020 and another 36 million in 2021. Self storage prices have regained strength. The average street rate ranged around $128 in January 2022, up 7% year-over-year per data from Yardi Matrix.

“Demand for both multifamily and self storage has remained strong in the wake of the pandemic,” said Doug Ressler, Business Intelligence Manager at Yardi Matrix. “Moreover, 2022 is shaping up to be a banner year for self storage due to high occupancy rates and positive overall performance.”

“The market is getting a big boost as demand comes not only from traditional sources – generally referred to as the 4 Ds: death, divorce, disaster and dislocation – but from additional drivers as well – including decluttering and distribution/business needs. In fact, operators are looking for new uses of self storage properties, including industrial distribution and logistics facilities,” Ressler added.

Texas is at the forefront of new construction, with three metro areas in the state – Dallas, Houston and Austin – ranking among the top 10 metros that added the most self storage space over the past decade. The New York-Newark-Jersey City metro area also performed well for new self storage construction during the same period.

The Dallas-Fort Worth-Arlington metro area ranks first nationally for new self storage construction. They built 23 million square feet of new storage space from 2012 to 2021, with 2018 being the peak at 4.1M square feet of new space. The Dallas metro area ranks high for new construction in other real estate sectors as well, including the residential market, which generally supports self storage. The population surge and the strong economic development of the Dallas metro area are the main factors behind the self storage construction sector performance over the past decade. However, as the local market became well-supplied, new self storage construction witnessed a slight decrease during the last two years of the decade – 2021 saw about 2.7M square feet of new space. Currently, a 10’x10’ self storage unit in Dallas rents for about $104 per month.

The New York metro area ranks second nationally for new self storage construction, an encouraging trend for this historically undersupplied market. They added about 22.5M square feet of new self storage space to the local inventory during the past 10 years. However, contrary to the national trend, construction activity actually picked up the pace during the final years of the decade analyzed. 2020 was the best year for new self storage construction in the New York metro area, with 4.3M square feet of space added, followed closely by 2019 with 4M square feet added. 2021 also saw a respectable 3.3M square feet of new space. The rent for a 10’x10’ storage unit in New York City stands around $190 per month, representing a 6% year-over-year increase.

The Houston metro area ranks third for new self storage supply over the past decade, with over 17M square feet of new space and 1M square feet added in 2021 alone. As the primary destination for newcomers moving to Texas, it’s only natural that the Houston-The Woodlands-Sugar Land metro area sees high levels of new self storage supply – moving is one of the main reasons people rent self storage. The street rate for a 10’x10’ self storage unit in Houston currently sits at $95.

The Chicago, Atlanta, Phoenix and Miami metro areas all added over 10M square feet of self storage supply over the past 10 years

The Chicago metro area ranks fourth nationally for new self storage construction between 2012 and 2021, with over 14M square feet of space. Unlike the other metro areas in the top 10, last year was the slowest of the decade in terms of new supply, with only 400K square feet of new space. However, this comes at the end of a decade of constant and sustained deliveries of new storage space. In 2016, it was at its peak with 2.6M square feet. The price for a 10’x10’ storage unit in Chicago stands at $115, under the national average. This shows that local developers can navigate a well-supplied, competitive market, and can, for now, balance the new construction activity against the existing inventory and demand.

After starting the decade on a lower note, the Atlanta-Sandy Springs-Alpharetta metro area saw new self storage supply flourishing during its second half. The metro area added over 12M square feet of new self storage space from 2012 to 2021. The Phoenix-Mesa-Chandler metro area follows closely, with 11.9M square feet of new storage space added to the local inventory during the past decade. The Phoenix metro area experienced the same annual trend as Atlanta: a slow start of the decade but a very strong second half, peaking in 2019. Both metro areas experienced fast population and economic growth over the past decade. This translated to intense real estate construction activity in all sectors, self storage included.

The Miami-Fort Lauderdale-Pompano Beach metro area ranks seventh nationally for new self storage construction over the past decade, adding 11.8M square feet of space. The Miami metro area, which also permitted almost 130K multifamily units during the same period, has a local economy that caters to retirees relocating here temporarily or permanently. As many of them live in rented apartments and tend to leave Miami for their home states during the summer months, they also have complex storage needs. This is one of the driving forces behind self storage demand in the area. The sector delivers, with 1.5M square feet of new space in 2021 alone.

The Washington-Arlington-Alexandria metro area is the first in this top 10 where the volume of self storage construction over the past decade dipped below the 10M square feet mark – but only slightly. The second half of the decade was significantly more active in terms of new deliveries, and 2021 saw the addition of over 1.5M square feet of new space.

Sustained population growth gives a strong push to self storage in Denver and Austin

Although both metro areas are smaller population-wise than the rest of the metro areas in the top 10, they managed a surprisingly strong performance over the past 10 years in terms of real estate development in general and self storage construction in particular. Both metro areas enjoyed constant population growth over the past decade and created the right environment for economic development. Both cities stand out as magnets for tech, which is one of the main employment drivers in the US.

The Denver-Aurora-Lakewood metro area built 8.7M square feet of new self storage space during the past decade, of which, they built 622K square feet last year. The Austin-Round Rock-Georgetown metro area, where they built 8.3M square feet of new self storage space from 2012 to 2021, experienced the highest volume of activity in 2019 – delivering 1.5M square feet that year.

After a strong performance over the past decade, the self storage sector continues to experience new avenues of further development. The mass adoption of work-from-home and coworking scenarios creates more demand for the self storage industry, from individuals and businesses alike.