Institutional capital remains active in the self-storage sector, but the criteria for acquisition 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.
De Jong, who has closed self-storage transactions in 32 states, observes that underwriting has shifted 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 single change has forced sellers to recalibrate, as properties that seemed strong 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 largest markets with the highest barriers to entry, such as Los Angeles, Boston, and New York, are attracting the most institutional attention. Seattle has seen a recent uptick in transaction interest, and Portland has been 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 are closely monitoring whether a market has multiple new facilities still in the planning pipeline.
Interestingly, the most aggressive pricing on a cap rate basis is occurring for mom-and-pop-operated facilities, according to de Jong. These properties, run informally for years without professional management or revenue tools, represent upside opportunities for buyers to improve performance quickly. In contrast, facilities that are already institutionally managed do not see the same aggressive pricing because 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 is using. Most large institutional buyers operate 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 higher returns. Which bucket is deployed determines what a buyer will consider, meaning the same buyer might pass on a deal for one fund and pursue it aggressively for another.
For sellers, 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 those relying on projected growth to justify their price face a tougher audience. These shifts point to a more disciplined institutional buyer than the market saw a few years ago, with implications for owners considering a sale in 2026.
