A Note from the Founder 02.03.2025

Zachary Urow February 3, 2025

The Changing Shape of Self-Storage Lending

  • Despite consumer prices dropping by 2/3 from their post-pandemic peak, inflation remains above the Fed’s 2% target, prompting continued monitoring of economic conditions.
  • Policymakers are assessing how current borrowing costs impact growth, signaling that future adjustments will depend on evolving data and inflationary trends.
  • The Federal Reserve maintained its benchmark target range at 4.25% to 4.5%, pausing after three consecutive rate cuts in December, reflecting caution due to lingering inflation concerns.

Resilient Demand and Optimistic Growth Projections for 2025

  • Occupancy and rent growth have stabilized across key markets, with operators projecting revenue and NOI growth of 2%-4% in 2025.
  • Northeast and Midwest markets like New York and Chicago are showing signs of recovery, while Sun Belt markets are expected to improve as supply-demand imbalances normalize.
  • Investment capital remains strong, with new entrants and private debt funds offsetting limited seller activity due to the still higher interest rates.
  • Key metros like Tampa are benefiting from resilient localized demand, driven by events such as the hurricane recovery, supporting consistent rate performance.

Our Thoughts

  • The Fed’s cautious stance highlights the need for flexible financing strategies as higher borrowing costs challenge traditional lending avenues.
  • Recovery in supply-demand balance across key markets signals improved conditions for revenue growth and long-term stability.
  • Projected NOI growth signals sustained investor confidence, emphasizing the importance of strategic market positioning and capital deployment.