The Evolving Landscape of Self-Storage Real Estate: Institutional Investor Strategies in 2025

The self-storage sector within industrial real estate has transitioned from pandemic-driven hypergrowth to a more measured phase of stabilization in 2025. Institutional investors, long drawn to the sector's defensive characteristics and recurring revenue model, are recalibrating their strategies amid moderating valuations and shifting market dynamics. This analysis explores the current state of the self-storage market, institutional investment trends, and the role of strategic operators like U-Haul in shaping the sector's trajectory.

Market Stabilization and Valuation Trends

According to a report by Cushman & Wakefield, the U.S. self-storage market has normalized in 2025, with transaction volumes aligning with pre-pandemic levels. Total self-storage transaction volume reached $2.8 billion in the first half of 2025, reflecting a slight increase compared to the same period in 2023 but signaling a return to equilibrium. Valuations have moderated significantly, dropping from a peak of $174 per square foot (PSF) in Q1 2023 to $159 PSF in Q2 2025-a 12% decline according to the report. This correction has been accompanied by stable cap rates, which have averaged 5.8% over the past six quarters, with class-A assets commanding 5% to 5.5% and class-B assets ranging between 5.5% to 6.5% as data shows.

Despite these adjustments, demand fundamentals remain robust. National occupancy has held steady at approximately 90% since 2023, with regional variations between 89% and 92%. Rental rates have stabilized between $124 and $132 PSF, averaging $127, while the Northeast and Pacific regions continue to command premium rates at $193 and $154 PSF, respectively according to market data. These metrics underscore the sector's resilience, even as macroeconomic headwinds persist.

Institutional Investment Strategies: Secondary Markets and Value-Add Opportunities

Institutional investors are increasingly prioritizing secondary markets and value-add opportunities as they seek to balance risk and return. With primary markets in major metropolitan areas becoming increasingly competitive and overvalued, capital is flowing toward underpenetrated regions where self-storage supply lags demand. This shift aligns with broader industrial real estate trends, where secondary markets offer better risk-adjusted returns.

Value-add strategies are also gaining traction. Investors are acquiring older assets with below-market occupancy and deploying capital to reposition them through renovations, operational improvements, and marketing. These initiatives aim to accelerate occupancy growth and capture rental rate upside, leveraging the sector's long-term demand drivers such as urbanization, e-commerce, and housing affordability challenges according to industry analysis.

U-Haul's Strategic Expansion: A Case Study in Long-Term Investment

A notable player in the self-storage sector is U-Haul (UHAL), which has continued to reinvest its cash flow into expanding its self-storage business despite short-term performance detriments. As highlighted in the AMG Yacktman Fund's Q3 2025 report, U-Haul's strategy exemplifies the long-term investment thesis of self-storage real estate: initial capital expenditures are front-loaded, with occupancy and revenue growth materializing over time.

U-Haul's business model distinguishes it from traditional self-storage REITs due to its truck rental business, which complicates sector classification and analyst coverage. However, its dual revenue streams-self-storage and truck rentals-offer diversification benefits and operational synergies. For institutional investors, U-Haul represents a unique opportunity to access the self-storage sector through a hybrid operator with a proven ability to scale according to fund analysis.

Future Outlook: Navigating Challenges and Opportunities

Looking ahead, the self-storage sector faces headwinds such as elevated construction costs, potential material tariffs, and tight debt liquidity, which have slowed development activity. However, 56% of industry leaders anticipate little to no change in cap rates over the next 12 months, according to industry data, suggesting confidence in the sector's stability.

Long-term fundamentals remain intact, with steady occupancy and rental rate growth expected to persist into 2026. Institutional investors are likely to maintain their focus on secondary markets and value-add opportunities, while operators like U-Haul will continue to shape the sector through strategic expansion.

Conclusion

The self-storage sector's transition to a post-pandemic equilibrium has not diminished its appeal for institutional investors. Instead, it has prompted a refinement of strategies, with a focus on disciplined capital allocation, geographic diversification, and long-term value creation. As the market navigates macroeconomic uncertainties, the sector's defensive characteristics and recurring revenue model position it as a compelling asset class for those willing to adopt a patient, strategic approach.