By Joshua Burd
An infusion of new self-storage space is coming to the New Jersey and New York region, where rents are rising amid a shrinking supply and other barriers to new development.
Those are among the findings of new research by Cushman & Wakefield, which tracked a development pipeline of 64 self-storage projects in a market that includes Newark, Edison and New York. That marks the largest quantity of projects of any region covered in the report and more than double the second-ranked region, Orlando, which has 25 projects on the books.
The findings come as median asking rents in New Jersey and New York averaged $2.05 per square foot in the third quarter, up 2.5 percent from the second quarter and 1.27 percent year over year, Cushman said. Self-storage facilities in the area were 95 percent occupied through Q3, up 5 percent from the second quarter and 0.8 percent year over year.
“Over the last few years, the expansion of self-storage in the (New York City) metro area created an abundance of extra storage units with high vacancy, keeping occupancy rates relatively flat,” said Mike Mele, executive vice chairman of C&W’s self-storage advisory group. “However, with the return of more people to the city post-COVID and less self-storage development, occupancy and rental rates have now stabilized.”
That has builders and investors gearing up to bring new supply to the market, even if many projects are still several years from completion. The C&W report found that, as of the third quarter, only five of the 64 projects in the New Jersey and New York metro were under construction or in the bidding phase, while 33 were in planning and another 12 were in preplanning.
Still, the self-storage sector’s growth is expected to remain robust in 2023, the real estate services firm said. National asking rents increased from Q2 by 1.5 percent and by 11.7 percent from a year earlier.
“We’ve seen the continued adoption of the work-from-home model drive additional demand for storage in both the city and surrounding areas,” Mele said. “Space within the home that would normally be designated for extra storage is now being used as additional space for new home office configurations.
“The market as a whole is undersupplied due to difficulties in identifying news areas to build, the cost of land rising, and new legislation limiting available storage options in the area.”