Self-Storage Real Estate in a Rising-Rate Environment: Assessing the Strategic Value of Fully Subscribed DST Offerings
The self-storage real estate sector has demonstrated remarkable resilience in 2025, even as rising interest rates have reshaped commercial real estate dynamics. According to a report by Cushman & Wakefield, Q1 2025 self-storage sales surged 37% year-over-year to $855 million, with average sale prices per square foot climbing to $117—a 31% increase from Q1 2024 [2]. This growth, however, emerged against a backdrop of tightening capital markets and a six-quarter decline in valuations prior to mid-2024. As the Federal Reserve's rate hikes pushed the federal funds rate to 5.25% by July 2023, self-storage capitalization rates for Class A facilities in top 30 MSAs rose nearly 100 basis points, from 4.00%-4.50% in Q4 2022 to 5.00%-6.00% by Q2 2024 [1].
Strategic Value of Fully Subscribed DSTs in a Rising-Rate Environment
Fully subscribed Delaware Statutory Trusts (DSTs) have emerged as a compelling investment vehicle within this evolving landscape. DSTs, which pool capital to acquire and manage real estate assets, offer investors exposure to high-quality self-storage properties while mitigating liquidity risks. In a rising-rate environment, their strategic value lies in their ability to lock in long-term, fixed-rate debt and leverage operational efficiencies. For instance, NexPoint's Storage VI DST, fully subscribed in September 2025, raised $45 million for two Class-A Generation-V facilities in Nashville and Maryland. These properties, managed by Extra Space StorageEXR--, feature climate-controlled units and are located in high-growth MSAs with above-average household incomes [3]. By securing fixed-rate financing and leveraging the operational expertise of established managers, DSTs like NexPoint's can insulate investors from short-term volatility while capitalizing on long-term demand drivers such as population growth and housing mobility.
The sector's fundamentals further bolster DSTs' appeal. Despite a temporary correction in valuations—self-storage prices per square foot stabilized at $141 by Q2 2024 after peaking at $172 in H2 2022—occupancy levels have remained near 90% in top markets [1]. This stability is underpinned by structural trends, including a reactivated housing market and climate-driven relocations. Additionally, REITs like CubeSmartCUBE-- and Extra Space Storage have demonstrated disciplined cost management, narrowing rental rate declines and improving occupancy through targeted pricing strategies [4]. For DST investors, these operational efficiencies translate to predictable cash flows and reduced sensitivity to macroeconomic headwinds.
Case Studies: NexPoint's DSTs and Market Resilience
NexPoint's success in fully subscribing its Storage V and VI DSTs underscores the sector's appeal during rate hikes. The Storage V DST, which raised $46 million for facilities in Cape Coral and Dundalk, capitalized on high-growth markets with strong job and population growth [3]. These properties, equipped with modern amenities like multi-story designs, attracted tenants willing to pay premium rates—a critical advantage in a competitive landscape. Similarly, Storage VI's focus on climate-controlled units aligns with shifting consumer preferences, as more households seek secure, temperature-regulated storage solutions.
The performance of these DSTs also highlights the importance of strategic location selection. As Cushman & Wakefield notes, markets with constrained supply and robust demographic growth—such as Nashville and Maryland—have outperformed peers in maintaining occupancy and rental rate stability [1]. By targeting such markets, DSTs can hedge against broader economic uncertainties and position themselves to benefit from localized demand surges.
Expert Outlook and Future Prospects
Industry experts remain cautiously optimistic about the sector's trajectory. While elevated rates and construction costs have slowed new development, the absorption of existing supply and normalization of capital markets are expected to drive modest rental growth (2-3%) in 2025 [5]. For DSTs, this environment presents opportunities to acquire stabilized assets at attractive valuations. As Ben Vestal of Argus Self Storage Advisors notes, “The self-storage sector's structural drivers—housing demand, lifestyle shifts, and climate resilience—will continue to underpin its long-term appeal, even in a high-rate environment” [5].
However, risks persist. Persistent inflation, geopolitical tensions, and potential recessionary pressures could dampen short-term demand. DST investors must also navigate the challenges of refinancing maturing debt in a higher-rate environment. Yet, for operators with strong balance sheets and disciplined capital structures—such as those with 84.5% fixed-rate debt—these risks are manageable [4].
Conclusion
The self-storage sector's resilience in 2025, coupled with the strategic advantages of fully subscribed DSTs, positions it as a compelling investment option in a rising-rate environment. By leveraging fixed-rate financing, targeting high-growth markets, and capitalizing on structural demand drivers, DSTs can deliver stable returns while mitigating macroeconomic risks. As the sector continues to stabilize and occupancy levels rebound, investors who prioritize operational efficiency and location-specific fundamentals will be well-positioned to capitalize on this dynamic market.
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