The self-storage sector has long been a resilient asset class, offering stable cash flow and hedge against economic downturns. The latest Yardi Matrix Q1 2025 Self Storage Supply Forecast presents compelling insights into how the market is evolving. With development slowing and a tightening supply pipeline, investors and operators have a strategic opportunity to capitalize on market trends. At Hearthfire Holdings, we continuously assess these shifts to optimize self-storage investments, acquisitions, and operations, ensuring strong returns for our investors and partners.

Market Trends Driving Self-Storage Investment Decisions

1. Slower Construction Activity Presents a Competitive Advantage

According to Yardi Matrix, self-storage construction starts declined by 20% in 2024 and will likely remain low in 2025. The under-construction pipeline contracted by 1.8% quarter-over-quarter and has declined 6.7% year-over-year, reflecting the economic headwinds that have deterred new development. While fewer new facilities may limit inventory growth, it strengthens pricing power for existing owners and operators. For investors, this means well-positioned acquisitions and existing assets will continue to appreciate in value.

2. Financing Challenges Reinforce the Importance of Strategic Partnerships

Rising interest rates and cautious lending policies have made financing new developments more complex. The Federal Reserve’s higher-for-longer stance on rates is expected to persist, keeping borrowing costs elevated. In this environment, partnering with experienced operators who understand capital structuring, such as Hearthfire Storage Partners, is crucial for mitigating risk and achieving investment objectives.

3. Site Selection is More Critical Than Ever

With planned and prospective pipelines contracting, developers must be highly selective when acquiring land for new self-storage projects. The Yardi Matrix report notes that the prospective pipeline has declined by 25.3% year-over-year, indicating a slowdown in site acquisitions. Investors should target high-barrier-to-entry markets where demand remains strong but supply remains constrained.

Key Strategies for Investors and Operators in 2025

1. Acquiring Existing Facilities for Stabilized Growth

With new development slowing, acquiring and repositioning existing facilities offers a compelling investment strategy. Investors can take advantage of reduced competition from new supply while enhancing operational efficiencies to improve NOI. Hearthfire Holdings specializes in identifying underperforming assets and optimizing their performance to maximize returns.

2. Leveraging Advisory Services for Operational Excellence

Successful self-storage investment goes beyond acquiring properties—it requires efficient operations, strategic marketing, and revenue optimization. Hearthfire Storage Partners provides expert advisory services to owner-operators, assisting with:

• Revenue management and dynamic pricing strategies
• Operational efficiencies to drive higher occupancy
• Technology implementation for cost reduction and tenant experience improvement
• Expansion and redevelopment strategies

3. Exploring Ground-Up Development in Underserved Markets

While development has slowed, select markets still present strong demand fundamentals. Investors willing to navigate the complexities of entitlements and construction can capitalize on the 2.0% projected new supply growth through 2027, as indicated in the Yardi Matrix forecast. Hearthfire’s development expertise enables investors to identify prime locations, secure financing, and execute profitable development projects.

Positioning for Success in 2025 and Beyond

As self-storage development activity continues to decelerate, investors who act strategically will benefit from constrained supply and rising demand. Whether acquiring existing assets, developing in high-demand markets, or leveraging operational expertise, partnering with an experienced team like Hearthfire Holdings ensures success in an evolving market.

Interested in learning more about self-storage investment opportunities? Contact Hearthfire Holdings today to explore how we can help you build wealth through self-storage.