Institutional capital is still chasing self-storage deals, but the criteria for what gets a yes have changed since 2021. Buyers are no longer underwriting on hope. They are underwriting today’s numbers, and that shift is changing which markets, assets, and sellers get a deal done, according to Tom de Jong, Executive Vice President at Colliers and founding principal of the De Jong Self Storage Team, who has closed self-storage transactions in 32 states.
Back in 2021, buyers would underwrite five to seven percent annual rent growth and still hit their return targets by year three. That math does not work anymore. De Jong says institutional buyers are now underwriting at today’s achieved rents, often with flat projections, and building their return case on what a property is actually collecting rather than what it might collect someday. That single change has forced sellers to recalibrate. A property that looked like a strong sale in 2022 based on projected rent growth may not clear the same bar today unless the in-place income already supports it.
This change in underwriting standards is also reshaping which markets institutional buyers will even consider. The biggest markets with the highest barriers to entry, such as Los Angeles, Boston, and New York, are getting the most institutional attention right now. Seattle has also seen a recent uptick in transaction interest, and Portland has been consistently active. On the other side, markets that saw heavy new supply, including Miami, Austin, Nashville, and Las Vegas, have seen institutional capital pull back. The pattern is consistent: buyers want markets where new competition is unlikely to undercut rents again, and they are paying close attention to whether a market has multiple new facilities still in the planning pipeline.
This focus on disciplined underwriting has also produced a counterintuitive result in pricing. One trend catching some sellers off guard is where the aggressive pricing is actually showing up. De Jong notes that mom-and-pop-operated facilities are seeing the most aggressive offers on a cap rate basis because buyers see management upside. A facility that has been run informally for years, without professional or institutional management or revenue tools, represents an opportunity for a buyer to step in and improve performance quickly. Facilities that are already institutionally managed do not see the same aggressive pricing. They are well run, but there is less room to add value through better management, so buyers treat them more as yield plays than upside plays.
Buyer behavior also varies depending on which part of an institution’s capital is doing the buying. De Jong points out that most large institutional buyers are not working from a single playbook. They typically have several 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 a higher return. Which bucket a buyer is pulling from determines what they will and will not consider, so the same buyer might pass on a deal for one fund and pursue it aggressively for another.
Taken together, these shifts point to a more disciplined institutional buyer than the market saw a few years ago. For owners considering a sale, the practical 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 properties leaning on projected growth to justify their price are facing a tougher audience.
