Institutional capital continues to pursue self-storage deals, but the criteria for investment have shifted significantly since 2021, according to Tom de Jong, Executive Vice President at Colliers and founding principal of the De Jong Self Storage Team. Buyers are no longer underwriting on hope; they are underwriting today’s numbers, a change that is reshaping which markets, assets, and sellers get deals done.
Underwriting has moved from growth projections to reality. In 2021, buyers would underwrite five to seven percent annual rent growth and still hit return targets by year three. That math no longer works. De Jong says institutional buyers now underwrite at today’s achieved rents, often with flat projections, building their return case on what a property actually collects rather than what it might collect someday. This shift has forced sellers to recalibrate; a property that seemed like a strong sale in 2022 based on projected rent growth may not clear the same bar today unless in-place income already supports it.
Location criteria are also tightening around barriers to entry. The biggest markets with the highest barriers to entry—such as Los Angeles, Boston, and New York—are receiving the most institutional attention. Seattle has seen a recent uptick in transaction interest, and Portland has been consistently active. Conversely, markets that saw heavy new supply, including Miami, Austin, Nashville, and Las Vegas, have seen institutional capital pull back. The pattern is consistent: buyers want markets where new competition is unlikely to undercut rents, and they are closely monitoring whether a market has multiple new facilities still in the planning pipeline.
Interestingly, mom-and-pop-operated facilities are attracting the most aggressive offers on a cap rate basis. De Jong notes that because these properties have been run informally without professional management or revenue tools, buyers see management upside and an opportunity to improve performance quickly. In contrast, facilities that are already institutionally managed do not see the same aggressive pricing; there is less room to add value, so buyers treat them as yield plays rather than upside plays.
Buyer behavior also varies depending on which part of an institution’s capital is doing the buying. Most large institutional buyers work from multiple funds: a core or core-plus fund focused on stabilized assets in established markets, and a value-add or development fund willing to take on lease-up risk for a higher return. Which bucket a buyer is pulling from determines what they will and will not consider, so the same buyer might pass on a deal for one fund and pursue it aggressively for another.
These shifts point to a more disciplined institutional buyer than the market saw a few years ago. For owners considering a sale, the practical takeaway is that achieved income now carries more weight than a pro forma. Properties with real, current cash flow in strong barrier-to-entry markets are seeing the most competitive interest, while properties leaning on projected growth to justify their price are facing a tougher audience.
