In 1995, I had an Acquisition Director for Storage Trust, a REIT at the time, tell me “Basically, self-storage is a boring and slow industry. Not many changes.”
That is certainly not the case in 2026. This industry is evolving and evolving at a fast clip.
If there was a story about self-storage in 2025 it was threefold:
- The high interest rates.
- Insurance costs (due to climate change) going up exponentially.
- Rates all over the place, primarily due to dynamic pricing revenue strategies.
As the year 2025 ended, there was cause for some cautious optimism because:
- At least for the REITs, occupancy rates were from 88% to north of 90%.
- Spreads between asking rates and in-house rates appear to be narrowing.
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- New supply has been drastically reduced due to high cost of capital, higher cost of materials, and tightening labor supply.
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However, existing oversupply does remain an issue, especially in many sunbelt markets and trade areas.
Another area of concern is the increase in operating expenses, primarily due to insurance and property tax increases.
So with this as a backdrop, let’s look into 2026.
2026 Forecast
Every time I think I have a handle on direction, something changes. As I prepared this episode, I had the 10-Year Treasury yield forecasts for 2026 between the 3.75% to 4.25% range in 2026, influenced heavily by
Federal Reserve interest rate decisions and inflation, with some models projecting declines from late 2025 levels.
However, I had to go back and modify this due to the person in the White House’s ongoing threats about taking over Greenland, creating geopolitical instability and affecting the bond market. As of 1-21-26, the 10-year
Treasury note was 4.267 (2:16 pm), and could be poised to go higher.
This is an important benchmark index because the 10-year Treasury note acts as a benchmark for long-term borrowing, reflecting economic health and inflation expectations.
My take is interest rates will be lower than 2025, but I don’t see them getting below 6% at best as long as we have an independent Federal Reserve. If we are unable to keep an independent Federal Reserve, who knows where our economy could end up. But as my wife tells me often, I could be wrong.
I don’t see cap rates moving much either. This makes buying listed self-storage very difficult for smaller investors. It is critical that smaller buyers today develop some strategy for finding off-market deals. Almost every deal I have been involved with over the past three years has been an off-market opportunity. And believe me, they are still out there.
The name of the game will be income integrity in 2026.
What I mean by that is use dynamic pricing in trade areas where necessary, but don’t let the algorithms push you into a race to the bottom. Yes, if you are in lease-up, especially in earlier stages, do what you can to get renters and momentum. But you don’t necessarily have to “beat” your competition on rates alone. Emphasize and sell your other features, and believe me, many renters are very tired of multiple price increases per year. Use that in your marketing and especially in your direct conversations with prospective buyers. Bake into your marketing what you will do for customers to minimize price increases if you can.
If you are close to or at stabilization, trust your rates and rate structure. There is more to storage than just rates and you will have to develop the skill if you don’t have it now to sell the other benefits you can offer.
I think this will separate the smart owners and operators from the herd in 2026.
I also think it is important to gravitate towards properties and opportunities in smaller markets than you may have thought about before. Sure you need population, population growth of some kind and good median income, but expand the location for your buy box. There are some great opportunities in many smaller markets.
Today I still hear buyers saying things like “I want red states, not blue states,” or “I want business friendly states to buy in.” That is all well and good, but that is where everyone has been focused over the past decade.
Hence, lower rates and lots of supply.
I tend to focus where most don’t today. I like finding existing storage in “blue” type states today because of the high barrier of entry and the usually much higher rental rates. I am focused almost exclusively there for existing self-storage off-market opportunities today. We are still in sunbelt states as we focus on boat and RV opportunities.
I see some increased opportunities for both of these areas in 2026, but not a floodgate opening by any stretch.
If we can get interest rates down, the gap between bid/ask prices could narrow, and transactions could pick up. At the same time, the lack of new inventory should help absorption rates which should also have a positive impact on overall rental rates.
So I am cautiously optimistic about 2026. But regardless, I intend on making this a great year for our self-storage business because I know we can quickly pivot in reaction to whatever comes down the road at us. You can too, because odds are you are not a large enterprise that reacts and turns slowly. Just be smart and know that given the large amount of political uncertainty today, it is important that we quickly figure out how what is happening can affect our business and make adjustments fast.
That is what I see today as I look at the next upcoming year. It will be interesting to come back to this episode in the last quarter of the year and see just where we are and how right or wrong I may have been. I think I know the answer, but I always can hear my wife’s voice in the background.
