The criteria institutional buyers use to evaluate self-storage acquisitions have shifted significantly since 2021, with underwriting now grounded in current performance rather than optimistic projections, according to Tom de Jong, Executive Vice President at Colliers and founding principal of the De Jong Self Storage Team.
De Jong, who has closed self-storage transactions in 32 states, notes that buyers previously underwrote five to seven percent annual rent growth and still achieved return targets by year three. That approach no longer works. Today, institutional buyers underwrite at 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 appeared strong for sale in 2022 based on projected rent growth may not clear the same bar unless the in-place income already supports it.
The shift in underwriting standards also reshapes which markets institutional buyers consider. Markets with the highest barriers to entry—such as Los Angeles, Boston, and New York—are receiving the most attention. Seattle has seen a recent uptick in transaction interest, and Portland remains consistently active. Conversely, markets that experienced heavy new supply, including Miami, Austin, Nashville, and Las Vegas, have seen institutional capital pull back. Buyers want markets where new competition is unlikely to undercut rents again, and they closely monitor whether a market has multiple new facilities still in the planning pipeline.
A counterintuitive trend in pricing is emerging: mom-and-pop-operated facilities are drawing the most aggressive offers on a cap rate basis. De Jong explains that buyers see management upside in facilities run informally without professional or institutional management or revenue tools. Improving operations quickly adds value. In contrast, institutionally managed facilities do not see the same aggressive pricing, as there is less room to add value through better management; buyers treat them more as yield plays than upside plays.
Buyer behavior also varies depending on which capital bucket an institution uses. 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 higher returns. Which bucket is used determines what the buyer will 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 relying on projected growth to justify their price face a tougher audience. For more insights, visit Colliers or contact Tom de Jong through the De Jong Self Storage Team page at https://www.colliers.com/en/experts/tom-de-jong.
