Institutional capital remains active in the self-storage sector, but the criteria for acquisitions have evolved 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 shift that is reshaping which markets, assets, and sellers can close deals.
De Jong, who has closed self-storage transactions in 32 states, highlights that 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. Institutional buyers now underwrite at today's achieved rents, often with flat projections, building their return case on what a property is actually collecting rather than what it might collect someday. This change has forced sellers to recalibrate; a property that looked like a strong sale in 2022 based on projected rent growth may not clear the same bar today unless the 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 again, and they are closely monitoring whether a market has multiple new facilities still in the planning pipeline.
A counterintuitive trend in pricing is that mom-and-pop-operated facilities are attracting the most aggressive offers on a cap rate basis. De Jong notes that buyers see management upside in facilities that have been run informally without professional or institutional management or revenue tools. These properties represent an opportunity for a buyer to step in and improve performance quickly. In contrast, facilities that are already institutionally managed do not see the same aggressive pricing; they are well-run but offer less room to add value through better management, so buyers treat them more as yield plays than upside plays.
Buyer behavior also varies depending on which part of an institution's capital is doing the buying. Most large institutional buyers have several 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.
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 face a tougher audience. This disciplined approach signals a more cautious institutional buyer than the market saw a few years ago.
