Navigating Market Volatility: Storage Outperforms Again

The Case for Stable Self-Storage Investments in 2025

By Sergio Altomare, CEO & Co-Founder of Hearthfire Holdings

Why Self-Storage Remains Resilient

The self-storage sector has consistently demonstrated remarkable resilience through various economic cycles. This resilience stems from several fundamental factors that remain relevant in 2025:

Recession Resistance: Self-storage demand is driven by life transitions—moving, downsizing, renovations—that continue regardless of economic conditions. In fact, certain economic pressures can actually increase demand for storage solutions.
Operational Simplicity: With low maintenance requirements, minimal tenant improvement costs, and straightforward management structures, self-storage facilities avoid many of the operational challenges facing other commercial real estate sectors.
Flexible Lease Structures: Month-to-month leases allow operators to adjust pricing quickly in response to market conditions and inflation, protecting investor returns in ways fixed-lease assets cannot.
Demographic Tailwinds: The continued growth of e-commerce businesses, the aging of Baby Boomers, and ongoing urbanization all contribute to sustained demand for storage space.

Resilience Through the Rate Cycle: The Self-Storage Advantage

Self-storage has once again proven its place as a safe haven in volatile market conditions. Through one of the most aggressive rate tightening cycles in modern history, the data tells a compelling story of strength, stability, and long-term value.

From near-zero interest rates in 2021 to a peak Fed Funds Rate of 5.33%, cap rates across commercial real estate have expanded sharply. However:

Self-storage cap rates rose just 150–175 basis points, significantly less than office (+185bps) and retail (+115bps).

The cap rate spread compressed to historic lows during the hike, yet remains tighter for self-storage, signaling investor confidence and defensive pricing.

As rates begin to ease in 2025, valuation recovery is already underway — led by self-storage.

Distress Metrics Reveal the Truth

While office and retail grapple with tenant attrition and loan defaults, self-storage shows a different story:

Metric	Self-Storage (Q1 2025)	CRE Average
Delinquency Rate	0.8%	Elevated
Special Servicing Rate	1.2%	Much higher
Distressed Sale %	3.5%	Significantly more
Transaction Volume	82% of 5-year average	Lagging

This level of performance underscores self-storage as the healthiest sector in CRE today — and a beacon for capital reallocation.

The Current Market Opportunity

While the self-storage market has matured since its explosive growth phase, strategic opportunities still exist for investors who understand how to identify and develop facilities in underserved markets. At Hearthfire, we’ve maintained a disciplined approach to site selection and development that prioritizes:

Markets with strong population growth
Areas with high barriers to entry
Locations with limited existing supply
Communities with strong household income metrics

This approach has allowed us to maintain occupancy rates and revenue growth even as broader markets experience turbulence.

Capital Structure as a Competitive Advantage

In today’s financing environment, how a project is structured matters tremendously. We’ve recently secured exceptionally favorable financing for our Whitehall self-storage development—a $10MM senior construction-to-perm loan at 60% loan-to-cost with interest-only periods and strong DSCR protections.

This advantageous debt structure, combined with our strategic incorporation of preferred equity, creates an investment opportunity designed to weather market volatility while maintaining strong projected returns. Our capital stack is specifically engineered to:

Optimize leverage without crossing institutional risk thresholds
Reduce dilution for common equity holders
Maintain strong cash flow through development and lease-up phases
Provide substantial downside protection for investors

The Whitehall Opportunity

Our current investment offering exemplifies our approach to creating stable, high-performing assets. Located in a growing market with strong demographics, the Whitehall self-storage facility represents a thoughtfully designed investment opportunity with:

Climate-controlled units to command premium pricing
Strategic location with excellent visibility and access
Multi-phase development approach to optimize capital deployment
Projected IRR of 19.99% and equity multiple of 2.47x

This means a $100,000 investment is projected to generate $247,000 over the five-year hold period—the kind of performance that’s increasingly difficult to find in today’s volatile market.

Learn More: Join Our Upcoming Webinar

To provide a deeper understanding of this opportunity and how we’re navigating current market conditions, I invite you to join me for a live investor webinar:

Date: Wednesday, May 7, 2025

Time: 1:00 PM EST

Topics:

How our capital strategy enhances return potential
What we’ve built into the structure to protect downside risk
Current market conditions and why self-storage continues to outperform

Reserve Your Spot for the May 7th Webinar

Due Diligence Made Easier

We understand the importance of thorough due diligence in any investment decision. That’s why we’ve developed our Artificial Investor Relations (AIR) bot to provide immediate answers to your questions about the Whitehall opportunity.

Our AIR system gives you 24/7 access to detailed information about:

Project financials and return projections
Market analysis and competitive landscape
Development timeline and milestones
Sponsor track record and experience

Test Drive AIR Now

The Hearthfire Difference

At Hearthfire Holdings, we’ve built our reputation on disciplined execution and strategic thinking. In volatile markets, this approach becomes even more valuable. By focusing on stable asset classes, maintaining conservative leverage, and implementing sophisticated capital structures, we create investment opportunities designed to perform through market cycles.

The Whitehall self-storage development represents this philosophy in action—a carefully structured investment in a resilient asset class, designed to deliver strong returns with meaningful downside protection.

I look forward to sharing more details during our upcoming webinar and welcome the opportunity to answer your questions about how self-storage investments can provide stability and growth for your portfolio in 2025 and beyond.