8 Dangers of Postponing Your Desired Self-Storage Build

A self-storage facility in progress in San Antonio, Texas (Photo courtesy of Capco General Contracting)

Self-storage remains one of the most resilient sectors in commercial real estate. Demand holds steady in economies strong or weak, and rental-rate growth has outpaced inflation for decades. Yet many would-be investors still hesitate. They’re waiting for the "perfect" time, lower costs or more certainty.

The problem is that waiting creates its own set of risks. In self-storage, time is often the biggest cost. Following are eight major disadvantages of delaying entry into the business, backed by current market data and industry insights.

1. Land Prices Continue to Climb

Land is the foundation of every self-storage project. Over the last 10 years, property values in most U.S. markets have trended upward. Urban parcels often exceed $1 million per acre. Suburban sites range from $50,000 to $500,000 per acre. Even secondary and rural markets that were once inexpensive have seen steady price growth due to housing expansion and logistics activity.

Delaying entry into the business means you face higher land-acquisition costs. For example, a site that cost $200,000 per acre in 2018 may now trade closer to $400,000.

In many metro areas, available parcels are absorbed by multi-family, retail or industrial projects, which drives up competition and price pressure. As interest rates come down, the cost of real estate often rises.

Every year you wait, your land budget buys less space in high-demand corridors. Don’t wait until it puts you out of the self-storage market.

2. Construction Costs Rarely Go Down

Self-storage construction costs are influenced by materials, labor and zoning regulations. According to recent estimates, they range from $75 to $95 per square foot for single-story projects and $100 to $130 per square foot for multi-story.

Periods of low construction activity, such as now, create opportunities. Contractors bid more competitively when pipelines are thin. Delaying means missing these windows. In contrast, when supply rebounds, builders are overloaded and pricing climbs. By waiting, you often lock yourself into higher cost structures with less negotiating power.

3. Lost Time Often Leads to No Action

Analysis paralysis is a real problem in self-storage. Investors who spend years studying the market, waiting for the perfect entry point, often lose out. Meanwhile, competitors enter and take the best sites. Delaying long enough can mean missing your chance altogether.

Keep in mind that a ground-up self-storage project, from land acquisition to opening, can take 14 to 36 months or more, depending on how long it takes to find a viable site. Hitting the shorter end of that spectrum usually requires purchasing a parcel with approved site and building plans. Meanwhile, competitors are capturing market share.

Industry data shows that self-storage development starts dropped 20% year-over-year in 2024. While this reflects tighter lending and higher interest rates, it also highlights the fact that fewer projects move forward in uncertain climates. Those who act during these slowdowns are often rewarded with profitable, stabilized, high-value assets five years later.

4. You Miss Out on Compounding Rent Growth

One of the self-storage industry’s strongest advantages is the ability to adjust rents. Unlike multi-family or office leases that lock in tenants for years, storage leases are month-to-month. This gives operators the ability to increase rates annually or even more frequently to keep pace with demand and inflation.

Rental rates for 10-by-10, climate-controlled units have grown 3% to 5% annually on average, outpacing inflation over the last two decades. By waiting to build, you forfeit these free compounding gains.

5. Asset Appreciation Works Against Late Entrants

Self-storage facilities are income-producing assets, and their worth is tied directly to net operating income. As revenue grows, so does property value. The longer you own, typically, the more appreciation you capture.

Self-storage facilities typically appreciate faster than inflation for a couple of reasons. First, over the long haul, we can increase our rental rates quicker than inflation escalates. Meanwhile, the cost of our land and buildings is fixed. We don’t have significant staff or products we need to purchase regularly.

In an inflationary environment, you’re paying your self-storage loan with dollars that are worth less every year. The longer you own your facility, the better off you are. Delaying development means you forfeit these equity gains. You end up paying more to acquire similar assets later while earning lower returns relative to cost.

6. Competitive Pressures Intensify Over Time

The self-storage industry has shifted from fragmented mom-and-pop ownership toward institutional capital. Real estate investment trusts (REITs) and private-equity firms are more active than ever. REITs now control more than 20% of the U.S. market, up from less than 10% just a decade ago.

Waiting to build simply increases your competition. Institutional players pay aggressively for land and existing self-storage facilities. The longer you delay, the harder it becomes to compete for prime assets.

7. Financing Conditions Change

Many of the investors who are hesitant to move forward with self-storage today also had an excuse not to get started when the interest rate on loans was only 4%. Owning a self-storage facility isn’t like owning a home where you get a 30-year mortgage and forget about it. Most industry loans must be renewed every five to 10 years. The longer the term, the higher the rate. Renewal is often beneficial, as many owners take out hundreds of thousands, if not millions, of dollars in equity when they refinance.

This isn’t the first or last time we’ll see interest rates in the 7% to 8% range. Many people developed self-storage during the Great Recession of 2008 and 2009, and they claim it was the best move they ever made. They have long since refinanced out of the 8% interest rate and are way ahead of the people who were lucky enough to start with a rate of 4%. If you can make a reasonable profit now, imagine how far ahead you’ll be compared to those who are waiting for rates to come down before they get started.

Interest rates and lending standards fluctuate. Investors who waited in 2021 when debt was less than 4% now face loans closer to 7% in many cases. A delay of even two years doubled their financing costs. This erodes returns and makes some projects unfeasible.

While future interest-rate cuts are possible, history shows that waiting for perfect financing is risky. Acting in a solid market with available capital is more advantageous than gambling on future debt conditions.

8. Market Cycles Favor Early Movers, But Market Timing Is a Fool’s Game

Like many businesses, self-storage moves in cycles. The experts can’t predict the market, so how can you? Investors who try to time the market often never find the right moment to get started, and they lose.

That said, interest rates are at the point where marginal sites will not work. Hopefully, your goal was never to buy or build one of these.

As interest rates come down, loan expenses will, too. And equally important, the housing market should make a comeback, increasing self-storage rental rates, occupancy and profit. Now’s the time to find a site that works at today’s interest rates and be excited when your rate drops at refinance.

Periods of heavy self-storage development are often followed by years of consolidation and rental-rate growth. Entering early in a cycle allows you to stabilize your asset before new supply floods the market. Coming in late often means fighting for occupancy during oversupply. The problem is there’s no surefire way to predict self-storage cycles.

We’re currently in a down market that shows signs of significant improvement on the way. But if you wait until it’s clear that we’re in a major upcycle, it’ll be too late to reap the full advantages. Plus, the market could change by the time you go through the self-storage development process.

Pulling It Together

If you’ve been thinking about developing a self-storage facility, don’t wait. The disadvantages are clear:

It’s harder to find land, and it costs more.
Construction expenses will be higher.
Time delays kill momentum.
Rental-rate and profit growth compounds without you.
Assets appreciate and end up in someone else’s portfolio.
Competition is only going to get stronger.
Financing conditions shift regularly and are unpredictable.
Market cycles can’t be timed, but all signs appear to be on the upswing.
The longer you wait, the more cash equity you’ll need.

Self-storage rewards decisive action. The best time to enter the market was 20 years ago. The next best time is now. Investors who step in will build equity, profit and a nest egg that latecomers will pay a huge premium to acquire—or they’ll be forced out of the market due to the higher costs and more competition. For those serious about the sector, hesitation is the costliest mistake of all.

Garrett Byrd is vice president of business development for Storage Authority LLC, which offers a self-storage franchise that guides owners through site selection, facility development and operation. He has more than 20 years of experience in real estate and self-storage management. To reach him, call 941.928.1354 or email [email protected].

About the Author

Garrett Byrd

Vice President of Business Development, Storage Authority LLC

Garrett Byrd is vice president of business development Storage Authority LLC, which offers a self-storage franchise model. He has more than 20 years of experience in real estate and self-storage management. To reach him, call 941.909.7222, or email [email protected].

See more from Garrett Byrd

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